us-irs-announcements-irb-2006-26-pdf•Internal Revenue Bulletin 2006-26 (PDF rendition): IRS Announcements
Internal Revenue Bulletin 2006-26 (PDF rendition): IRS Announcements
us-irs-announcements-irb-2006-26-pdfInternal Revenue Bulletin 2006-26 (PDF rendition): IRS AnnouncementsGuidance
Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.
Bulletin No. 200 6-26 June 26, 2006 HIGHLIGHTS OF THIS ISSUE These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations. INCOME TAX Rev. Rul. 2006–33, page 1148. LIFO; price indexes; department stores.The April 2006 Bureau of Labor Statistics price indexes are accepted for use by department stores employing the retail inventory and last-in, first-out inventory methods for valuing inventories for tax years ended on, or with reference to, April 30, 2006. T.D. 9264, page 1150. REG–13431 7–05, page 1184. Final, tem porary, and proposed regulations under section 1502 of the Code and others simplify, clarify, or eliminate taxpayer reporting burdens. They also eliminate regulatory impediments to the ele ctronic filing of certain statements that taxpayers are required to include on or with their federal income tax returns. Notice 2006–52, page 1175. This notice sets forth a process that allows a taxpayer who owns a commercial building and installs property as part of the commercial building’s interior lighting systems, heating, cool- ing, ventilation, and hot water systems, or building envelope to obtain a certification that the property satisfies the energy effi- ciency requirements of section 179D(c)(1) and (d) of the Code. The notice also provides for a public list of software programs that may be used in calculating energy and power consumption for purposes of section 179D. Notice 2006–53, page 1180. This notice modifies section 4.04 of Notice 2006–26, 2006–11 I.R.B. 622, to make clear that a component that provides structural support or a finished surface, or a com- ponent that has as a principal purpose any function unrelated to the reduction of heat loss or gain, is not a component specifically and primarily designed to reduce heat loss or gain of a dwelling. Notice 2006–26 clarified. Notice 2006–54, page 1180. This notice provides procedures that a vehicle manufacturer (or, in the case of a foreign vehicle manufacturer, its domes- tic distributor) may use to certify that both a particular make, model, and year of vehicle qualifies as an alternative fuel mo- tor vehicle under sections 30B(a)(4) and (e) of the Code and the amount of the credit allowable with respect to the vehicle. The notice also provides guidance to taxpayers who purchase vehicles regarding the conditions under which they may rely on the vehicle manufacturer’s certification. Announcement 2006–39, page 1186. The 2005 Form 6765,Credit for Increasing Research Activi- ties, is revised to show that only 20% of the energy research consortia expense is included in the alternative incremental credits. ESTATE TAX Rev. Rul. 2006–32, page 1170. Special use value; farms; interest rates.The 2006 interest rates to be used in computing the special use value of farm real property for which an election is made under section 2032A of the Code are listed for estates of decedents. (Continued on the next page) Actions Relating to Court Decisions is on the page following the Introduction. Ann ouncement of Declaratory Judgment Proceedings Under Section 7428 begins on page 1187. Finding Lists begin on page ii. Index for January through June begins on page vi. Rev. Rul. 2006–34, page 1171. Real property interests; closely held business.This rul- ing updates the guidance provided by Rev. Ruls. 75–365, 75–366, and 75–367, and provides certain safe harbors and a non-exclusive list of factors that are likely to be relevant in determining whether a deceased owner’s activities with regard to certain real property were sufficiently active to support a finding that the real property interest constitutes a closely held business interest for purposes of section 6166 of the Code. Rev. Rul. 75–365 revoked and Rev. Rul. 75–367 revoked in part. ADMINISTRATIVE Rev. Rul. 2006–34, page 1171. Real property interests; closely held business.This rul- ing updates the guidance provided by Rev. Ruls. 75–365, 75–366, and 75–367, and provides certain safe harbors and a non-exclusive list of factors that are likely to be relevant in determining whether a deceased owner’s activities with regard to certain real property were sufficiently active to support a finding that the real property interest constitutes a closely held business interest for purposes of section 6166 of the Code. Rev. Rul. 75–365 revoked and Rev. Rul. 75–367 revoked in part. T.D. 9264, page 1150. REG–134317–05, page 1184. Final, temporary, and proposed regulations under section 1502 of the Code and others simplify, clarify, or eliminate taxpayer reporting burdens. They also eliminate regulatory impediments to the electronic filing of certain statements that taxpayers are required to include on or with their federal income tax returns. June 26, 20062006–26 I.R.B. The IRS Mission Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all. Introduction The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conven- tions, legislation, court decisions, and other items of general interest. It is published weekly and may be obtained from the Superintendent of Documents on a subscription basis. Bulletin contents are compiled semiannually into Cumulative Bulletins, which are sold on a single-copy basis. It is the policy of the Service to publish in the Bulletin all sub- stantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, mod- ify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indi- cated. Procedures relating solely to matters of internal man- agement are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published. Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same. The Bulletin is divided into four parts as follows: Part I.—19 86 Code. This part i ncludes rulings and decisions based on provisions of the Intern al Revenue Code of 1986. Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Leg- islation and Related Committee Reports. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rul- ings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Sec- retary (Enforcement). Part IV .—Items of General Interest. This par t includes notices of proposed rulemakings, disbar- ment an d suspension lists, and announcements. The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period. The c ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate. For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402. 2006–26 I.R.B.June 26, 2006 Actions Relating to Decisions of the Tax Court It is the policy of the Internal Rev- enue Service to announce at an early date whether it will follow the holdings in cer- tain cases. An Action on Decision is the document making such an announcement. An Action on Decision will be issued at the discretion of the Service only on unap- pealed issues decided adverse to the gov- ernment. Generally, an Action on Decision is issued where its guidance would be help- ful to Service personnel working with the same or similar issues. Unlike a Treasury Regulation or a Revenue Ruling, an Action on Decision is not an affirmative statement of Service position. It is not intended to serve as public guidance and may not be cited as precedent. Actions on Decisions shall be relied upon within the Service only as conclu- sions applying the law to the facts in the particular case at the time the Action on Decision was issued. Caution should be exercised in extending the recommenda- tion of the Action on Decision to similar cases where the facts are different. More- over, the recommendation in the Action on Decision may be superseded by new legis- lation, regulations, rulings, cases, or Ac- tions on Decisions. Prior to 1991, the Service published acquiescence or nonacquiescence only in certain regular Tax Court opinions. The Service has expanded its acquiescence program to include other civil tax cases where guidance is determined to be help- ful. Accordingly, the Service now may acquiesce or nonacquiesce in the holdings of memorandum Tax Court opinions, as well as those of the United States District Courts, Claims Court, and Circuit Courts of Appeal. Regardless of the court decid- ing the case, the recommendation of any Action on Decision will be published in the Internal Revenue Bulletin. The recommendation in every Action on Decision will be summarized as ac- quiescence, acquiescence in result only, or nonacquiescence. Both “acquiescence” and “acquiescence in result only” mean that the Service accepts the holding of the court in a case and that the Service will follow it in disposing of cases with the same controlling facts. However, “ac- quiescence” indicates neither approval nor disapproval of the reasons assigned by the court for its conclusions; whereas, “acquiescence in result only” indicates disagreement or concern with some or all of those reasons. “Nonacquiescence” sig- nifies that, although no further review was sought, the Service does not agree with the holding of the court and, generally, will not follow the decision in disposing of cases involving other taxpayers. In reference to an opinion of a circuit court of appeals, a “nonacquiescence” indicates that the Service willnot follow the hold- ing on a nationwide basis. However, the Service will recognize the precedential impact of the opinion on cases arising within the venue of the deciding circuit. The Actions on Decisions published in the weekly Internal Revenue Bulletin are consolidated semiannually and appear in the first Bulletin for July and the Cumula- tive Bulletin for the first half of the year. A semiannual consolidation also appears in the first Bulletin for the following January and in the Cumulative Bulletin for the last half of the year. The Commissioner does NOT ACQUI- ESCE in the following decision: Pacific Gas and Electric Company v. United States, 1 417 F.3d 1375 (Fed. Cir. 2005), rev’g 55 Fed. Cl. 271 (2003) 1 Nonacquiescence relating to whether the statute of limitations barred the Service from recovering erroneously paid overpayment interest by offsetting against a subsequent refund of tax and interest determined to be due to the taxpayer for the same taxable year. June 26, 20062006–26 I.R.B. Part I. Rulings and Decisions Under the Internal Revenue Code of 1986 Section 279.—Interest on Indebtedness Incurred by Corporation to Acquire Stock or Assets of Another Corporation Temporary and proposed regulations simplify, clarify, or eliminate taxpayer reporting burdens. They also eliminate regulatory impediments to the electronic filing of certain statements that taxpay- ers are required to include on or with their Federal income tax returns. See T.D. 9264, page 1150. Section 302.—Distributions in Redemption of Stock Temporary and proposed regulations simplify, clarify, or eliminate taxpayer reporting burdens. They also eliminate regulatory impediments to the electronic filing of certain statements that taxpayers are required to include on or with their Federal in- come tax returns. See T.D. 9264, page 1150. See REG-134317-05, page 1184. Section 331.—Gain or Loss to Shareholders in Corporate Liquidations Temporary and proposed regulations simplify, clarify, or eliminate taxpayer reporting burdens. They also eliminate regulatory impediments to the electronic filing of certain statements that taxpayers are required to include on or with their Federal in- come tax returns. See T.D. 9264, page 1150. See REG-134317-05, page 1184. Section 332.—Complete Liquidations of Subsidiaries Temporary and proposed regulations simplify, clarify, or eliminate taxpayer reporting burdens. They also eliminate regulatory impediments to the electronic filing of certain statements that taxpayers are required to include on or with their Federal in- come tax returns. See T.D. 9264, page 1150. See REG-134317-05, page 1184. Secti on 338.—Certain Stock Purchases Treated as Ass et Acquisitions Tempo rary and proposed regulations simplify, clari fy, or eliminate taxpayer reporting burdens. They also eliminate regulatory impediments to the electronic filing of certain statements that taxpayers are required to include on or with their Federal in- come tax returns. See T.D. 9264, page 1150. See REG-134317-05, page 1184. Section 351.—Transfer to Corporation Controlled by Transferor Temporary and proposed regulations simplify, clarify, or eliminate taxpayer reporting burdens. They also eliminate regulatory impediments to the electronic filing of certain statements that taxpayers are required to include on or with their Federal in- come tax returns. See T.D. 9264, page 1150. See REG-134317-05, page 1184. Section 355.—Distribution of Stock and Securities of a Controlled Corporation Temporary and proposed regulations simplify, clarify, or eliminate taxpayer reporting burdens. They also eliminate regulatory impediments to the electronic filing of certain statements that taxpayers are required to include on or with their Federal in- come tax returns. See T.D. 9264, page 1150. See REG-134317-05, page 1184. Section 368.—Definitions Relating to Corporate Reorganizations Temporary and proposed regulations simplify, clarify, or eliminate taxpayer reporting burdens. They also eliminate regulatory impediments to the electronic filing of certain statements that taxpayers are required to include on or with their Federal in- come tax returns. See T.D. 9264, page 1150. See REG-134317-05, page 1184. Section 381.—Carryovers in Certain Corporate Acquisitions Temporary and proposed regulations simplify, clarify, or eliminate taxpayer reporting burdens. They also eliminate regulatory impediments to the electronic filing of certain statements that taxpayers are required to include on or with their Federal in- come tax returns. See T.D. 9264, page 1150. See REG-134317-05, page 1184. Section 382.—Limitation on Net Operating Loss Carryforwards and Certain Built-in Losses Following Ownership Change Temporary and proposed regulations simplify, clarify, or eliminate taxpayer reporting burdens. They also eliminate regulatory impediments to the electronic filing of certain statements that taxpayers are required to include onor with their Federal in- come tax returns. See T.D. 9264, page 1150. See REG-134317-05, page 1184. Section 472.—Last-in, First-out Inventories 26 CFR 1.472–1: Last-in, First-out inventories. LIFO; price indexes; department stores.The April 2006 Bureau of Labor Statistics price indexes are accepted for use by department stores employing the retail inventory and last-in, first-out in- ventory methods for valuing inventories for tax years ended on, or with reference to, April 30, 2006. Rev. Rul. 2006–33 The follo wing Department Store In- ventory P rice Indexes for April 2006 were issued b y the Bureau of Labor Statistics. The inde xes are accepted by the Inter- nal Reve nue Service, under § 1.472–1(k) of the In come Tax Regulations and Rev. Proc. 86 –46, 1986–2 C.B. 739, for ap- propri ate application to inventories of depart ment stores employing the retail invent ory and last-in, first-out inventory method s for tax years ended on, or with refere nce to, April 30, 2006. The Dep artment Store Inventory Price Indexe s are prepared on a national basis and in clude (a) 23 major groups of depart- ments , (b) three special combinations of the ma jor groups — soft goods, durable goods , and miscellaneous goods, and (c) a store total, which covers all departments, incl uding some not listed separately, ex- cept for the following: candy, food, liquor, toba cco, and contract departments. 2006–26 I.R.B.1148June 26, 2006 BUREAU OF LABOR STATISTICS, DEPARTMENT STORE INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS (January 1941 = 100, unless otherwise noted) GroupsApr 2005Apr 2006 Percent Change from Apr 2005 to Apr 2006 1 1. PieceGoods .............................................469.8466.8-0.6 2. DomesticsandDraperies..................................539.1494.2-8.3 3. Women’sandChildren’sShoes ............................679.7718.75.7 4. Men’sShoes.............................................876.6881.70.6 5. Infants’Wear ............................................582.7570.7-2.1 6. Women’sUnderwear......................................545.2562.23.1 7. Women’sHosiery ........................................342.9354.83.5 8. Women’sandGirls’Accessories ...........................599.6578.2-3.6 9. Women’sOuterwearandGirls’Wear .......................376.2372.6-1.0 10. Men’sClothing ..........................................565.6548.8-3.0 11. Men’sFurnishings........................................586.6582.1-0.8 12. Boys’ClothingandFurnishings............................440.4414.3-5.9 13. Jewelry..................................................879.9866.7-1.5 14. Notions .................................................779.0788.21.2 15. ToiletArticlesandDrugs..................................994.41003.50.9 16. FurnitureandBedding ....................................604.2607.80.6 17. FloorCoverings..........................................601.0615.02.3 18. Housewares..............................................714.1695.9-2.5 19. MajorAppliances.........................................202.8204.40.8 20. RadioandTelevision......................................39.536.9-6.6 21. Recreation and Education 2 .................................78.376.9-1.8 22. Home Improvements 2 .....................................136.4140.02.6 23. Automotive Accessories 2 ..................................114.4118.83.8 Groups1–15:SoftGoods .......................................572.4567.3-0.9 Groups16–20:DurableGoods...................................380.8374.8-1.6 Group s 21–23: Misc. Goods 2 .................................... 93.093.40.4 Store Total 3 ..............................................503.5499.1-0.9 1 Absence of a minus sign before the percentage change in this column signifies a price increase. 2 In dexes on a January 1986 = 100 base. 3 The store total index covers all departments, including some not listed separately, except for the following: candy, food, liquor, tobacco, and contract departments. DRAFTING INFORMATION The principal author of this revenue ruling is Michael Burkom of the Office of Associate Chief Counsel (Income Tax and Accounting). For further informa- tion regarding this revenue ruling, contact Mr. Burkom at (202) 622–7924 (not a toll-free call). Section 1081.—Nonrecog- nition of Gain or Loss on Exchanges or Distri- butions in Obedience to Orders of S.E.C. Temporary and proposed regulations simplify, clarify, or eliminate taxpayer reporting burdens. They also eliminate regulatory impediments to the electronic filing of certain statements that taxpayers are required to include on or with their Federal in- come tax returns. See T.D. 9264, page 1150. See REG-134317-05, page 1184. Section 1221.—Capital Asset Defined Temporary and proposed regulations simplify, clarify, or eliminate taxpayer reporting burdens. They also eliminate regulatory impediments to the electronic filing of certain statements that taxpayers are required to include onor with their Federal in- come tax returns. See T.D. 9264, page 1150. See REG-134317-05, page 1184. June 26, 200611492006–26 I.R.B. Section 1502.—Regulations 26 CFR 1.1502–13: Intercompany transactions. T.D. 9264 DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1 and 602 Guidance Necessary to Facilitate Business Electronic Filing and Burden Reduction AGENCY: Internal Revenue Service (IRS), Treasury ACTION: Final and temporary regula- tions. SUMMARY: These regulations affect tax- payers that file Federal income tax returns. They simplify, clarify, or eliminate report- ing burdens and also eliminate regulatory impediments to the electronic filing of cer- tain statements that taxpayers are required to include on or with their Federal income tax returns. The text of the temporary reg- ulations also serves as the text of the pro- posed regulations (REG–134317–05) set forth in the notice of proposed rulemaking on this subject in this issue of the Bulletin. DATES:Effective Date:These regulations are effective on May 30, 2006. Applicability Date:For dates of appli- cability, see §§1.302–2T(d), 1.302–4T(h), 1.331–1T(f), 1.332–6T(e), 1.338–10T(c), 1.351–3T(f), 1.355–5T(e), 1.368–3T(e), 1.381(b)–1T(e), 1.382–8T(j)(4), 1.382– 11T(b), 1.1081–11T(f), 1.1221–2T(j), 1.1502–13T(m), 1.1502–31T(j), 1.1502– 32T(j), 1.1502–33T(k), 1.1502–35T(k), 1.1502–76T(d), 1.1502–95T(g), 1.1563– 1T(e), 1.1563–3T(e) and 1.6012–2T(k). The applicability of these regulations will expire on May 26, 2009. FOR FURTHER INFORMATION CONTACT: Grid Glyer, (202) 622–7930 (not a toll-free number). SUPPLEMENTARY INFORMATION: Paperwork Reduction Act These temporary regulations are being issued without prior notice and public pro- cedure pursuant to the Administrative Pro- cedure Act (5 U.S.C. 553). For this reason, the collection of information contained in these regulations has been reviewed and, pending receipt and evaluation of public comments, approved by the Office of Man- agement and Budget under control number 1545–2019. Responses to this collection of information are mandatory. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number. For further information concerning this collection of information, and where to submit comments on the collection of in- formation and the accuracy of the esti- mated burden, and suggestions for reduc- ing this burden, please refer to the pream- ble to the cross-referencing notice of pro- posedrulemakingpublishedinthisissueof the Bulletin. Books and records relating to a collec- tion of information must be retained as long as their contents may become mate- rial in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as re- quired by 26 U.S.C. 6103. Background This Treasury Decision amends Trea- sury regulations under sections 279, 302, 331, 332, 338, 351, 355, 368, 381, 382, 1081, 1221, 1502, 1563, and 6012 of the Internal Revenue Code (Code) that require taxpayers to include a statement on or with their Federal income tax returns. In some cases, these statements are the method by which taxpayers elect (or elect out of) a particular income tax treatment. In other cases, these statements are the method by which taxpayers report that they undertook a particular type of transaction. In both cases, these regulations often require tax- payers to include detailed amounts of in- formation in these statements, or do not clearly specify the required information. In addition, many of these regulations present impediments that prevent corpo- rate taxpayers from submitting these state- ments as part of an electronically filed Fed- eral income tax return (e-filing). Some of these regulations, for example, impede e-filingbyrequiringtaxpayerstosigna statement and include it on or with the tax- payer’s income tax return. Others require a taxpayer to include third-party signatures on such statements or require taxpayers to attach documents, or information supplied by a third party. Explanation of Provisions 1.Reporting Requirements That Were Simplified, Clarified, or Eliminated A.Regulations for which the reporting requirements were simplified or clarified Some regulations require a taxpayer to include a statement on or with its return if it undertakes certain types of transac- tions. In some cases, these regulations re- quire the taxpayer to submit detailed in- formation about the particular transaction with its return. In other cases, the scope of the reporting requirement was unclear. The IRS and Treasury Department believe that it is not useful to require taxpayers to attach all of this information to their returns. Accordingly, these regulations simplify and clarify the reporting require- ments under several provisions. B.Regulations for which the reporting requirements were eliminated Some regulations require that all share- holders and security holders that receive stock or securities incertain distributions or exchanges file statements providing information about that distribution or exchange.See,e.g., §§1.355–5(b) and 1.368–3(b). The IRS and Treasury De- partment have determined that for most shareholders and security holders these statements are no longer necessary. Ac- cordingly, these temporary regulations only require that a “significant holder” file such statement. In the case of stock, a significant holder is a holder of stock of a corporation if at the time of the distri- bution or exchange such holder owns at least: (1) 5% (by vote or value) of the total outstanding stock of such corporation if the stock owned by such holder is publicly traded,or(2)1%(byvoteorvalue)ofthe total outstanding stock of such corporation if the stock owned by such holder is not publicly traded.See,e.g., §§1.355–5T(b) and 1.368–3T(b). These regulations use the definition of publicly traded stock found elsewhere in the regulations.See, 2006–26 I.R.B.1150June 26, 2006 e.g., §§1.1092(d)–1(b), 1.1273–2(f) and 54.4975–7(b)(1)(iv). In the case of securities, a significant holder is a holder of securities of a corpo- ration if at the time of the distribution or exchange such holder owns securities with a basis of $1,000,000 or more. 2.Regulations That Present Impediments to E-filing As described in this preamble in para- graphs 2.A. and 2.B., certain regulations impose reporting requirements that are im- pediments to e-filing. The IRS and Trea- sury Department are issuing these tempo- rary regulations to eliminate such impedi- ments without altering the substantive re- quirements of the current regulations. A.Statements required to be signed by the taxpayer Some regulations require a taxpayer to include a statement on or with its return in order to make an election, or notify the IRS that the taxpayer is undertaking a transaction authorized by that provision. In the case of elections, the current regu- lations often require the taxpayer to sign such statement. In these circumstances, the requirement that the taxpayer sign the statement is an impediment to e-filing and superfluous. By signing the return, a tax- payer is attesting to the validity of the Form 1120 as well as all of the attach- ments. Accordingly, for these types of statements, the underlying regulations are amended to eliminate the requirement that such statements be signed. B.Statements required to be signed by both the taxpayer and a third party Some regulations require that the tax- payer and another person sign a statement, and that the taxpayer include such jointly signed statement on or with its return. In some cases, the taxpayer is required to pro- vide a copy of this statement, or other in- formation, to the other person and that per- son is required to include such copy or in- formation on or with its return. These requirements are impediments to e-filing. However, in such cases, the joint signature requirement cannot simply be eliminated because, in the absence of that requirement, the taxpayer and the other person might take inconsistent positions. Therefore, these regulations amend the provisions with a joint signature require- ment to require the taxpayer and the other person to include a statement on or with its return indicating that it has entered into an agreement with the other party address- ing the substantive matters covered by the statement required under the current regulations. These agreements will con- tain the same information as the jointly signed statements required by the current regulations. Each party will be required to retain either the original or a copy of this agreement as part of its records. See §1.6001–1(e). C.Section 1561 Section 1561(a) provides that the com- ponent members of a controlled group of corporations are limited to using the amounts of the tax benefit items described therein in the same manner as if they were one corporation. Section 1561(a) gener- ally provides that such amounts shall be divided equally among such members. However, section 1561(a) also provides that if such members adopt an appor- tionment plan, they are then permitted to allocate such amounts among themselves unequally. Section 1.1561–3(b) provides the mechanism by which such members may consent to an apportionment plan. Section 1.1561–3(b) presents impedi- ments to e-filing. However, the IRS and Treasury Department have determined that these impediments cannot be eliminated without also addressing certain substantive issues present in these regulations. Ad- dressing these issues is beyond the scope of this project. Therefore, these issues will be addressed in separate guidance that the IRS and Treasury Department expect to publish later this year. 3.Requirement That Taxpayers Provide the Fair Market Value and Basis of Assets or Stock Certain of these regulations require tax- payers to provide in their reporting state- ment the fair market value and basis of as- sets or stock distributed or exchanged in a transaction. The IRS and Treasury De- partment recognize that, in some cases, a taxpayer may not conveniently be able to provide a precise valuation of property ex- changed or distributed in a transaction that is not taxable in the current year. In those cases, for the purposes of these statements, the IRS and Treasury Department will ac- cept a taxpayer’s good faith estimate of such fair market value. Similarly, the IRS and Treasury Depart- ment recognize that there are occasionally situations where a taxpayer may not be able to precisely determine its basis in a taxable year in which that basis would not be relevant to determining the taxpayer’s taxable income. As in the case of fair mar- ket value, for purposes of these statements, the IRS and Treasury Department will in these situations accept a taxpayer’s good faith estimate of such basis. 4.Election to Restore Value Under §1.382–8 In the case of a controlled group of cor- porations, §1.382–8 provides that, for pur- poses of determining the section 382 limi- tation, the value of the stock of each com- ponent member of the controlled group of which the loss corporation is a component member on the change date must be re- duced by the value of the stock of any other component member that such component member directly owns immediately after an ownership change. However, the com- ponent member’s value may be increased by the amount of value that such other component member elects to restore. The IRS and Treasury Department are aware that taxpayers generally elect to re- store value from component members that are foreign corporations. The IRS and Treasury Department are also aware that taxpayers occasionally fail to make the election timely and must file a request for relief under §301.9100–1. Therefore, to reduce unnecessary elections and section 9100 requests, §1.382–8T(h)(2) will deem foreign component members to elect to re- store full value to other component mem- bers under §1.382–8. Nevertheless, should such members not wish to restore the full amount of such value, they may elect not to restore all or part of such value. Further, a foreign component member that has items treated as connected with the conduct of a trade or business in the United States that it takes into account in determining its value under section 382(e)(3) is not subject to this deemed election. The IRS and Treasury Department re- quest comments regarding the scope and June 26, 200611512006–26 I.R.B. application of this deemed election to re- store value. 5.Recordkeeping Requirement The IRS and Treasury Department em- phasize that although the amount of infor- mation that a taxpayer is required to in- clude on or with its return has, in most cases, decreased, the taxpayer’s record- keeping requirement remains unchanged. Certain of these regulations illustrate the type of information taxpayers are recom- mended to keep in order to substantiate their reporting position. 6.Rev. Proc. 2006–21 Contemporaneously with the issuance of these temporary regulations, the IRS and Treasury Department are releasing Rev. Proc. 2006–21, 2006–24 I.R.B. 1050, to remove e-filing impediments and reduce reporting requirements currently found in Rev. Proc. 89–56, 1989–2 C.B. 643, Rev. Proc. 90–39, 1990–2 C.B. 365, and Rev. Proc. 2002–32, 2002–1 C.B. 959. Each revenue procedure provides a method for consolidated taxpayers to request a specified consent or waiver from the Commissioner without submitting a request for a private letter ruling. In partic- ular, Rev. Proc. 89–56 permits taxpayers to request a consent to use a 52–53 week tax year, Rev. Proc. 90–39 permits tax- payers to request a consent to change the method for allocating tax liability to mem- bers for earnings and profits purposes, and Rev. Proc. 2002–32 permits taxpayers to request a waiver of the 60-month limita- tion on reconsolidation. 7.§1.1502–35 These regulations also include a re- vision to §1.1502–35 that is not related to electronic filing or reporting require- ments. The revision corrects an error in the determination of the time period dur- ing which suspended losses are reduced under that section. Specifically, these reg- ulations provide that this time period ends on the day before the first date on which the subsidiary (and any successor) is not a member of the group. Special Analysis It has been determined that this Trea- sury Decision is not asignificant regula- tory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. For the applicability of the Regulatory Flexibility Act (5 U.S.C. chap- ter 6), refer to the Special Analyses section of the preamble to the cross-reference no- tice of proposed rulemaking published in this issue of the Bulletin. Pursuant to sec- tion 7805(f) of the Code, these temporary regulations will be submitted to the Chief Counsel for Advocacy of the Small Busi- ness Administration for comment on their impact on small business. Drafting In formation The principal author of these regula- tions is Grid Glyer, Office of Associate Chief Counsel (Corporate). However, other personnel from the IRS and Treasury Department participated in their develop- ment. ***** Adoption of Amendments to the Regulations Accordingly, 26 CFR parts 1 and 602 are amended as follows: PART 1—INCOME TAXES Paragraph 1. The authority citation for part1isamendedbyaddingentriesinnu- merical order to read, in part, as follows: Authority: 26 U.S.C. 7805 * * * Section 1.338–10T also issued under 26 U.S.C. 338. * * * Section 1.1221–2T also issued under 26 U.S.C. 1502. * * * Section 1.1502–13T also issued under 26 U.S.C. 1502. * * * Section 1.1502–31T also issued under 26 U.S.C. 1502. * * * Section 1.1502–32T also issued under 26 U.S.C. 1502. * * * Section 1.1502–33T also issued under 26 U.S.C. 1502. * * * Section 1.1502–35T also issued under 26 U.S.C. 1502. * * * Section 1.1502–76T also issued under 26 U.S.C. 1502. * * * Section 1.1502–95T also issued under 26 U.S.C. 1502. * * * Par. 2. Section 1.279–5 is amended by removing paragraph (h). Par. 3. Section 1.302–2 is amended by: 1. Redesignating paragraph (b) as para- graph (b)(1). 2. Revising newly designated para- graph (b)(1). 3. Adding paragraphs (b)(2) and (d). The additions and revisions read as fol- lows: §1.302–2 Redemptions not taxable as dividends. ***** (b)(1) The question whether a distri- bution in redemption of stock of a share- holder is not essentially equivalent to a dividend under section 302(b)(1) depends upon the facts and circumstances of each case. One of the facts to be considered in making this determination is the con- structive stock ownership of such share- holder under section 318(a). All distribu- tions inpro rataredemptions of a part of the stock of a corporation generally will be treated as distributions under section 301 if the corporation has only one class of stock outstanding. However, for distributions in partial liquidation, see section 302(e). The redemption of all of one class of stock (ex- cept section 306 stock) either at one time or in a series of redemptions generally will be considered as a distribution under sec- tion 301 if all classes of stock outstanding at the time of the redemption are held in the same proportion. Distributions in re- demption of stock may be treated as dis- tributions under section 301 regardless of the provisions of the stock certificate and regardless of whether all stock being re- deemed was acquired by the stockholders from whom the stock was redeemed by purchase or otherwise. (2) [Reserved]. For further guidance, see §1.302–2T(b)(2). ***** (d) [Reserved]. For further guidance, see §1.302–2T(d)(1). Par. 4. Section 1.302–2T is added to read as follows: §1.302–2T Redemptions not taxable as dividends (temporary). (a) through (b)(1) [Reserved]. For fur- ther guidance, see §1.302–2(a) through (b)(1). (2) Unless paragraph (d) of §1.331–1T applies, every significant holder that trans- fersstocktotheissuingcorporationin exchange for property from such cor- poration must include on or with such 2006–26 I.R.B.1152June 26, 2006 holder’s return for the taxable year of such exchange a statement entitled, “STATE- MENT PURSUANT TO §1.302–2T(b)(2) BY [INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A SIGNIFICANT HOLDER OF THE STOCK OF [INSERT NAME AND EMPLOYER IDENTIFI- CATION NUMBER (IF ANY) OF ISSU- ING CORPORATION].” If a significant holder is a controlled foreign corpora- tion (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must in- clude— (i) The fair market value and basis of the stock transferred by the significant holder to the issuing corporation; and (ii) A description of the property re- ceived by the significant holder from the issuing corporation. (3)Definitions. For purposes of this section: (i)Significant holdermeans any person that, immediately before the exchange— (A) Owned at least five percent (by vote or value) of the total outstanding stock of the issuing corporation if the stock owned by such person is publicly traded; or (B) Owned at least one percent (by vote or value) of the total outstanding stock of the issuing corporation if the stock owned by such person is not publicly traded. (ii)Publicly traded stockmeans stock that is listed on— (A) A national securities exchange reg- istered under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f); or (B) An interdealer quotation system sponsored by a national securities asso- ciation registered under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o–3). (iii)Issuing corporationmeans the cor- poration that issued the shares of stock, some or all of which were transferred by a significant holder to such corporation in the exchange described in paragraph (b)(2) of this section. (4)Cross reference. See section 6043 of the Code for requirements relating to a return by a liquidating corporation. (c) [Reserved]. For further guidance, see §1.302–2(c). (d)Effective date—(1)Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such origi- nalreturn)timelyfiledonorafterMay30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 5. Section 1.302–4 is amended by revising paragraph (a) and adding para- graph (h) to read as follows: §1.302–4 Termination of shareholder’s interest. (a) [Reserved]. For further guidance, see §1.302–4T(a). ***** (h) [Reserved]. For further guidance, see §1.302–4T(h)(1). Par. 6. Section 1.302–4T is added to read as follows: §1.302–4T Termination of shareholder’s interest (temporary). (a) The agreement specified in section 302(c)(2)(A)(iii) shall be in the form of a statement entitled, “STATEMENT PUR- SUANT TO SECTION 302(c)(2)(A)(iii) BY [INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER OR RELATED PER- SON, AS THE CASE MAY BE], A DIS- TRIBUTEE (OR RELATED PERSON) OF [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF DISTRIBUTING CORPORATION].” The distributee must include such state- ment on or with the distributee’s first return for the taxable year in which the distribution describedin section 302(b)(3) occurs. If the distributee is a controlled foreign corporation (within the meaning of section 957), each United States share- holder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The distributee must represent in the state- ment— (1) THE DISTRIBUTEE (OR RE- LATED PERSON) HAS NOT AC- QUIRED, OTHER THAN BY BEQUEST OR INHERITANCE, ANY INTEREST IN THE CORPORATION (AS DE- SCRIBED IN SECTION 302(c)(2)(A)(i)) SINCE THE DISTRIBUTION; and (2) THE DISTRIBUTEE (OR RE- LATED PERSON) WILL NOTIFY THE INTERNAL REVENUE SERVICE OF ANY ACQUISITION, OTHER THAN BY BEQUEST OR INHERITANCE, OF SUCH AN INTEREST IN THE COR- PORATION WITHIN 30 DAYS AFTER THE ACQUISITION, IF THE ACQUI- SITION OCCURS WITHIN 10 YEARS FROM THE DATE OF THE DISTRIBU- TION. (b) through (g) [Reserved]. For further guidance, see §1.302–4(b) through (g). (h)Effective date—(1)Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such origi- nal return) timely filed on or after May 30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 7. Section 1.331–1 is amended by revising paragraph (d) and adding para- graph (f) to read as follows: §1.331–1 Corporate liquidations. ***** (d) [Reserved]. For further guidance, see §1.331–1T(d). ***** (f) [Reserved]. For further guidance, see §1.331–1T(f)(1). Par. 8. Section 1.331–1T is added to read as follows: §1.331–1T Corporate liquidations (temporary). (a) through (c) [Reserved]. For further guidance, see §1.331–1(a) through (c). (d)Reporting requirement —(1)Gen- eral rule. Every significant holder that transfers stock to the issuing corporation in exchange for property from such corpora- tion must include on or with such holder’s return for the year of such exchange the statement described in paragraph (d)(2) of this section unless— (i) The property is part of a distribu- tion made pursuant to a corporate resolu- tion reciting that the distribution is made in complete liquidation of the corporation; and (ii) The issuing corporation is com- pletely liquidated and dissolved within one year after the distribution. (2)Statement. If required by para- graph (d)(1) of this section, a signif- June 26, 200611532006–26 I.R.B. icant holder must include on or with such holder’s return a statement enti- tled, “STATEMENT PURSUANT TO §1.331–1T(d) BY [INSERT NAME AND TAXPAYER IDENTIFICATION NUM- BER (IF ANY) OF TAXPAYER], A SIG- NIFICANT HOLDER OF THE STOCK OF [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF ISSUING CORPORATION].” If a significant holder is a controlled foreign corporation (within the meaning of sec- tion 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The state- ment must include— (i) The fair market value and basis of the stock transferred by the significant holder to the issuing corporation; and (ii) A description of the property re- ceived by the significant holder from the issuing corporation. (3)Definitions. For purposes of this section: (i)Significant holdermeans any person that, immediately before the exchange— (A) Owned at least five percent (by vote or value) of the total outstanding stock of the issuing corporation if the stock owned by such person is publicly traded; or (B) Owned at least one percent (by vote or value) of the total outstanding stock of the issuing corporation if the stock owned by such person is not publicly traded. (ii)Publicly traded stockmeans stock that is listed on— (A) A national securities exchange reg- istered under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f); or (B) An interdealer quotation system sponsored by a national securities asso- ciation registered under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o–3). (iii)Issuing corporationmeans the cor- poration that issued the shares of stock, some or all of which were transferred by a significant holder to such corporation in the exchange described in paragraph (d)(1) of this section. (4)Cross reference. See section 6043 of the Code for requirements relating to a return by a liquidating corporation. (e) [Reserved]. For further guidance, see §1.331–1(e). (f)Effective date—(1)Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such origi- nalreturn)timelyfiledonorafterMay30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. §1.332–6 [Removed] Par. 9. Section 1.332–6 is removed. Par. 10. Section 1.332–6T is added to read as follows: §1.332–6T Records to be kept and information to be filed with return (temporary). (a)Statement filed by recipient corpora- tion. If any recipient corporation received a liquidating distribution from the liquidat- ing corporation pursuant to a plan (whether or not that recipient corporation has re- ceived or will receive other such distribu- tions from the liquidating corporation in other tax years as part of the same plan) during the current tax year, such recipi- ent corporation must include a statement entitled, “STATEMENT PURSUANT TO SECTION 332 BY [INSERT NAME AND EMPLOYER IDENTIFICATION NUM- BER (IF ANY) OF TAXPAYER], A COR- PORATION RECEIVING A LIQUIDAT- ING DISTRIBUTION,” on or with its re- turn for such year. If any recipient cor- poration is a controlled foreign corpora- tion (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must in- clude— (1) The name and employer identifica- tion number (if any) of the liquidating cor- poration; (2) The date(s) of all distribution(s) (whether or not pursuant to the plan) by the liquidating corporation during the cur- rent tax year; (3) The aggregate fair market value and basis, determined immediately before the liquidation, of all of the assets of the liq- uidating corporation that have been or will be transferred to any recipient corporation; (4) The date and control number of any private letter ruling(s) issued by the Inter- nal Revenue Service in connection with the liquidation; (5) The following representation: THE PLAN OF COMPLETE LIQUIDATION WAS ADOPTED ON [INSERT DATE (mm/dd/yyyy)]; and (6) A representation by such recipient corporation either that— (i) THE LIQUIDATION WAS COMPLETED ON [INSERT DATE (mm/dd/yyyy)]; or (ii) THE LIQUIDATION IS NOT COMPLETE AND THE TAXPAYER HAS TIMELY FILED [INSERT EITHER FORM 952, “Consent To Extend the Time to Assess Tax Under Section 332(b),” OR NUMBER AND NAME OF THE SUC- CESSOR FORM]. (b)Filings by the liquidating corpo- ration. The liquidating corporation must timely file Form 966,“Corporate Disso- lution or Liquidation,”(or its successor form) and its final Federal corporate in- come tax return. See also section 6043 of the Code. (c)Definitions. For purposes of this section: (1)Planmeans the plan of complete liquidation within the meaning of section 332. (2)Recipient corporationmeans the corporation describedin section 332(b)(1). (3)Liquidating corporationmeans the corporation that makes a distribution of property to a recipient corporation pur- suant to the plan. (4)Liquidating distributionmeans a distribution of property made by the liquidating corporation to a recipient cor- poration pursuant to the plan. (d)Substantiation information. Under §1.6001–1(e), taxpayers are required to retain their permanent records and make such records available to any authorized Internal Revenue Service officers and em- ployees. In connection with a liquida- tion described in this section, these records should specifically include information re- garding the amount, basis, and fair mar- ket value of all distributed property, and relevant facts regarding any liabilities as- sumed or extinguished as part of such liq- uidation. (e)Effective date—(1)Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such origi- nal return) timely filed on or after May 30, 2006. 2006–26 I.R.B.1154June 26, 2006 (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 11. Section 1.338–0 is amended by revising the entry for§1.338–10(a)(4)(iii) and adding entries for §1.338–10(c) and §1.338–10T to read as follows: §1.338–0 Outline of topics. ***** §1.338–10 Filing of returns. (a) * * * (4) * * * (iii) [Reserved] ***** (c) [Reserv ed] §1.338–10T Filing of returns (temporary). (a)(1) through (a)(4)(ii) [Reserved] (iii) Procedure for filing a combined re- turn. (a)(4)(iv) through (b) [Reserved] (c) Effective date. (1) Applicability date. (2) Expiration date. ***** Par. 12. Section 1.338–10 is amended by revising paragraph (a)(4)(iii) and adding paragraph (c) to read as follows: §1.338–10 Filing of returns. (a) * * * (4) * * * (iii) [Reserved]. For further guidance, see §1.338–10T(a)(4)(iii). ***** (c) [Reserved]. For further guidance, see §1.338–10T(c)(1). Par. 13. Section 1.338–10T is added to read as follows: §1.338–10T Filing of returns (temporary). (a)(1) through (a)(4)(ii) [Reserved]. For further guidance, see §1.338–10(a)(1) through (a)(4)(ii). (iii)Procedure for filing a combined re- turn. A combined return is made by fil- ing a single corporation income tax re- turn in lieu of separate deemed sale re- turns for all targets required to be included in the combined return. The combined return reflects the deemed asset sales of all targets requiredto be included in the combined return. If the targets included in the combined return constitute a sin- gle affiliated group within the meaning of section 1504(a), the income tax return is signed by an officer of the common par- ent of that group. Otherwise, the return must be signed by an officer of each tar- get included in the combined return. Rules similar to the rules in §1.1502–75(j) apply for purposes of preparing the combined re- turn. The combined return must include a statement entitled, “ELECTION TO FILE A COMBINED RETURN UNDER SEC- TION 338(h)(15).” The statement must in- clude— (A) The name, address, and employer identification number of each target re- quired to be included in the combined re- turn; and (B) The following declaration: EACH TARGET IDENTIFIED IN THIS ELEC- TION TO FILE A COMBINED RETURN CONSENTS TO THE FILING OF A COMBINED RETURN. (a)(4)(iv) through (b) [Reserved]. For further guidance, see §1.338–10(a)(4)(iv) through (b). (c)Effective date—(1)Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such origi- nalreturn)timelyfiledonorafterMay30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. §1.351–3 [Removed] Par. 14. Section 1.351–3 is removed. Par. 15. Section 1.351–3T is added to read as follows: §1.351–3T Records to be kept and information to be filed (temporary). (a)Significant transferor. Every signif- icant transferor must include a statement entitled, “STATEMENT PURSUANT TO §1.351–3T(a) BY [INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A SIGNIFICANT TRANSFEROR,” on or with such transferor’s income tax return for the taxable year of the section 351 exchange. If a significant transferor is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must include— (1) The name and employer identifica- tion number (if any) of the transferee cor- poration; (2)Thedate(s)ofthetransfer(s)ofas- sets; (3) The aggregate fair market value and basis, determined immediately before the exchange, of the property transferred by such transferor in the exchange; and (4) The date and control number of any private letter ruling(s) issued by the Inter- nal Revenue Service in connection with the section 351 exchange. (b)Transferee corporation. Except as provided in paragraph (c) of this section, every transferee corporation must include a statement entitled, “STATEMENT PUR- SUANT TO §1.351–3T(b) BY [INSERT NAME AND EMPLOYER IDENTI- FICATION NUMBER (IF ANY) OF TAXPAYER], A TRANSFEREE COR- PORATION,”onorwithitsincometax return for the taxable year of the exchange. If the transferee corporation is a controlled foreign corporation (within the meaning of section 957), each United States share- holder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must include— (1) The name and taxpayer identifica- tion number (if any) of every significant transferor; (2)Thedate(s)ofthetransfer(s)ofas- sets; (3) The aggregate fair market value and basis, determined immediately before the exchange, of all of the property received in the exchange; and (4) The date and control number of any private letter ruling(s) issued by the Inter- nal Revenue Service in connection with the section 351 exchange. (c)Exception for certain transferee cor- porations. The transferee corporation is not required to file a statement under para- graph (b) of this section if all of the infor- mation that would be included in the state- ment described in paragraph (b) of this section is included in any statement(s) de- scribed in paragraph (a) of this section that is attached to the same return for the same section 351 exchange. (d)Definitions. For purposes of this section: June 26, 200611552006–26 I.R.B. (1)Significant transferormeans a per- son that transferred property to a corpora- tion and received stock of the transferee corporation in an exchange described in section 351 if, immediately after the ex- change, such person— (i) Owned at least five percent (by vote or value) of the total outstanding stock of the transferee corporation if the stock ownedbysuchpersonispubliclytraded, or (ii) Owned at least one percent (by vote or value) of the total outstanding stock of the transferee corporation if the stock owned by such person is not publicly traded. (2)Publicly traded stockmeans stock that is listed on— (i) A national securities exchange regis- tered under section 6 of the Securities Ex- change Act of 1934 (15 U.S.C. 78f); or (ii) An interdealer quotation system sponsored by a national securities asso- ciation registered under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o–3). (e)Substantiation information.Under §1.6001–1(e), taxpayers are required to retain their permanent records and make such records available to any authorized Internal Revenue Service officers and em- ployees. In connection with the exchange described in this section, these records should specifically include information regarding the amount, basis, and fair mar- ket value of all transferred property, and relevant facts regarding any liabilities assumed or extinguished as part of such exchange. (f)Effective date—(1)Applicability date. This section applies to any original Federal income tax return (including any amendedreturnfiledonorbeforethedue date (including extensions) of such origi- nal return) timely filed on or after May 30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 16. Section 1.355–0 is amended by removing the entry for §1.355–5 and adding an entry for §1.355–5T. The revision and addition read as fol- lows: §1.355–0 Outline of sections. ***** §1.355–5T Records to be kept and information to be filed (temporary). ***** §1.355–5 [Removed] Par. 17. Section 1.355–5 is removed. Par. 18. Section 1.355–5T is added to read as follows: §1.355–5T Records to be kept and information to be filed (temporary). (a)Distributing corporation—(1)In general. Every corporation that makes a distribution (the distributing corpora- tion) of stock or securities of a controlled corporation, as described in section 355 (or so much of section 356 as relates to section 355), must include a statement entitled, “STATEMENT PURSUANT TO §1.355–5T(a) BY [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A DISTRIBUTING CORPORATION,” on or with its return for the year of the dis- tribution. If the distributing corporation is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must include— (i) The name and employer identifica- tion number (if any) of the controlled cor- poration; (ii) The name and taxpayer identifica- tion number (if any) of every significant distributee; (iii) The date of the distribution of the stock or securities of the controlled corpo- ration; (iv) The aggregate fair market value and basis, determined immediately before the distribution or exchange, of the stock, securities, or otherproperty (including money) distributed by the distributing cor- poration in the transaction; and (v) The date and control number of any private letter ruling(s) issued by the Inter- nal Revenue Service in connection with the transaction. (2)Special rule when an asset transfer precedes a stock distribution.Ifthedis- tributing corporation transferred property to the controlled corporation in a transac- tion described in section 351 or 368, as part of a plan to then distribute the stock or securities of the controlled corporation in a transaction described in section 355 (or so much of section 356 as relates to sec- tion 355), then, unless paragraph (a)(1)(v) of this section applies, the distributing corporation must also include on or with its return for the year of the distribution the statement required by §1.351–3T(a) or 1.368–3T(a). If the distributing corpo- ration is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include the statement re- quired by §1.351–3T(a) or 1.368–3T(a) on or with its return. (b)Significant distributee.Every significant distributee must include a statement entitled, “STATEMENT PUR- SUANT TO §1.355–5T(b) BY [INSERT NAME AND TAXPAYER IDENTIFI- CATION NUMBER (IF ANY) OF TAX- PAYER], A SIGNIFICANT DISTRIBU- TEE,” on or with such distributee’s return for the year in which such distribution is received. If a significant distributee is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must include— (1) The names and employer identifi- cation numbers (if any) of the distributing and controlled corporations; (2) The date of the distribution of the stock or securities of the controlled corpo- ration; and (3) The aggregate basis, determined immediately before the exchange, of any stock or securities transferred by the sig- nificant distributee in the exchange, and the aggregate fair market value, deter- mined immediately before the distribution or exchange, of the stock, securities or other property (including money) received by the significant distributee in the distri- bution or exchange. (c)Definitions. For purposes of this section: (1)Significant distributeemeans— (i) A holder of stock of a distributing corporation that receives, in a transaction described in section 355 (or so much of section 356 as relates to section 355), stock of a corporation controlled by the distribut- ing corporation if, immediately before the distribution or exchange, such holder— 2006–26 I.R.B.1156June 26, 2006 (A) Owned at least five percent (by vote or value) of the total outstanding stock of the distributing corporation if the stock owned by such holder is publicly traded; or (B) Owned at least one percent (by vote or value) of the stock of the distributing corporation if the stock owned by such holder is not publicly traded; or (ii) A holder of securities of a distribut- ing corporation that receives, in a transac- tion described in section 355 (or so much of section 356 as relates to section 355), stock or securities of acorporation con- trolled by the distributing corporation if, immediately before the distribution or ex- change, such holder owned securities in such distributing corporation with a basis of $1,000,000 or more. (2)Publicly traded stockmeans stock that is listed on— (i) A national securities exchange regis- tered under section 6 of the Securities Ex- change Act of 1934 (15 U.S.C. 78f); or (ii) An interdealer quotation system sponsored by a national securities asso- ciation registered under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o–3). (d)Substantiation information.Under §1.6001–1(e), taxpayers are required to retain their permanent records and make such records available to any authorized Internal Revenue Service officers and em- ployees. In connection with the distribu- tion or exchange described in this section, these records should specifically include information regarding the amount, basis, and fair market value of all property dis- tributed or exchanged, and relevant facts regarding any liabilities assumed or extin- guished as part of such distribution or ex- change. (e)Effective date—(1)Applicability date. This section applies to any original Federal income tax return (including any amendedreturnfiledonorbeforethedue date (including extensions) of such origi- nal return) timely filed on or after May 30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. §1.368–3 [Removed] Par. 19. Section 1.368–3 is removed. Par. 20. Section 1.368–3T is added to read as follows: §1.368–3T Records to be kept and information to be filed with returns (temporary). (a)Parties to the reorganization.The plan of reorganization must be adopted by each of the corporations that are par- ties thereto. Each such corporation must include a statement entitled, “STATE- MENT PURSUANT TO §1.368–3T(a) BY [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A CORPORATION A PARTYTOAREORGANIZATION,”on or with its return for the taxable year of the exchange. If any such corporation is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its re- turn. However, it is not necessary for any taxpayer to include more than one such statement on or with the same return for the same reorganization. The statement must include— (1) The names and employer identifica- tion numbers (if any) of all such parties; (2) The date of the reorganization; (3) The aggregate fair market value and basis, determined immediately before the exchange, of the assets, stock or securities of the target corporation transferred in the transaction; and (4) The date and control number of any private letter ruling(s) issued by the Inter- nal Revenue Service in connection with this reorganization. (b)Significant holders. Every signif- icant holder, other than a corporation a party to the reorganization, must include a statement entitled, “STATEMENT PUR- SUANT TO §1.368–3T(b) BY [INSERT NAME AND TAXPAYER IDENTIFI- CATION NUMBER (IF ANY) OF TAX- PAYER], A SIGNIFICANT HOLDER,” on or with such holder’s return for the tax- able year of the exchange. If a significant holder is a controlled foreign corpora- tion (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must in- clude— (1) The names and employer identifica- tion numbers (if any) of all of the parties to the reorganization; (2) The date of the reorganization; and (3) The fair market value, determined immediately before theexchange, of all the stock or securities of the target corporation held by the significant holder that is trans- ferred in the transaction and such holder’s basis, determined immediately before the exchange, in the stock or securities of such target corporation. (c)Definitions. For purposes of this section: (1)Significant holdermeans— (i) A holder of stock of the target cor- poration that receives stock or securities in an exchange described in section 354 (or so much of section 356 as relates to section 354) if, immediately before the exchange, such holder— (A) Owned at least five percent (by vote or value) of the total outstanding stock of the target corporation if the stock owned by such holder is publicly traded; or (B) Owned at least one percent (by vote or value) of the total outstanding stock of the target corporation if the stock owned by such holder is not publicly traded; or (ii) A holder of securities of the tar- get corporation that receives stock or se- curities in an exchange described in sec- tion 354 (or so much of section 356 as re- lates to section 354) if, immediately before the exchange, such holder owned securi- ties in such target corporation with a basis of $1,000,000 or more. (2)Publicly traded stockmeans stock that is listed on— (i) A national securities exchange regis- tered under section 6 of the Securities Ex- change Act of 1934 (15 U.S.C. 78f); or (ii) An interdealer quotation system sponsored by a national securities as- sociation registered under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o–3). (d)Substantiation information. Under §1.6001–1(e), taxpayers are required to retain their permanent records and make such records available to any authorized Internal Revenue Service officers and em- ployees. In connection with the reorga- nization described in this section, these records should specifically include infor- mation regarding the amount, basis, and fair market value of all transferred prop- erty, and relevant facts regarding any lia- bilities assumed or extinguished as part of such reorganization. June 26, 200611572006–26 I.R.B. (e)Effective date—(1)Applicability date. This section applies to any original Federal income tax return (including any amendedreturnfiledonorbeforethedue date (including extensions) of such origi- nal return) timely filed on or after May 30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 21. Section 1.381(b)–1 is amended by revising paragraph (b)(3) and adding paragraph (e) to read as follows: §1.381(b)–1 Operating rules applicable to carryovers in certain corporate acquisitions. ***** (b) * * * (3) [Reserved]. For further guidance, see §1.381(b)–1T(b)(3). ***** (e) [Reserved]. For further guidance, see §1.381(b)–1T(e)(1). Par. 22. Section 1.381(b)–1T is added to read as follows: §1.381(b)–1T Operating rules applicable to carryovers in certain corporate acquisitions (temporary). (a) through (b)(2) [Reserved]. For fur- ther guidance, see §1.381(b)–1(a) through (b)(2). (3)Election—(i)Content of state- ments. The statements referred to in paragraph (b)(2) of §1.381(b)–1 must be entitled, “ELECTION OF DATE OF DISTRIBUTION OR TRANSFER PUR- SUANT TO §1.381(b)–1(b)(2),” and must include: [INSERT NAME AND EMPLOYER IDENTIFICATION NUM- BER (IF ANY) OF DISTRIBUTOR OR TRANSFEROR CORPORATION] AND [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF ACQUIRING CORPORATION] ELECT TO DETERMINE THE DATE OF DISTRIBUTION OR TRANSFER UNDER §1.381(b)–1(b)(2). SUCH DATE IS [INSERT DATE (mm/dd/yyyy)]. (ii)Filing of statements. One statement must be included on or with the timely filed Federal income tax return of the dis- tributor or transferor corporation for its taxable year ending with the date of distri- bution or transfer. An identical statement must be included on or with the timely filed Federal income tax return of the ac- quiring corporation for its first taxable year ending after that date. If the distributor or transferor corporation, or the acquiring corporation, is a controlled foreign corpo- ration (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. (b)(4) through (d) [Reserved]. For further guidance, see §1.381(b)–1(b)(4) through (d). (e)Effective date—(1)Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such origi- nalreturn)timelyfiledonorafterMay30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 23. Section 1.382–1 is amended by: 1. Revising the entry for §1.382–2T(a) (2)(ii). 2. Revising the entry for §1.382–8(c) (2). 3.Redesignating the entry for §1.382–8(e)(4) as the entry for §1.382–8(e)(5). 4. Adding entries for paragraphs (e)(4) and (j)(4) of §1.382–8. 5. Revising the entry for paragraph (h), and removing the entries for paragraphs (h)(1), (h)(2) and (h)(3), of §1.382–8. 6. Adding entries for §1.382–8T. 7. Removing the entry for §1.382–11. 8. Adding entries for §1.382–11T. The additions and revisions read as fol- lows: §1.382–1 Table of contents. ***** §1.382–2T Definition of ownership change under section 382, as amended by the Tax Reform Act of 1986 (temporary). ***** (a) * * * (2) * * * (ii) [Reserved] ***** §1.382–8 Controlled groups. ***** (c) * * * (2) [Reserved] ***** (e) * * * (4) [Reserved] (5) Predecessor and successor corpora- tion. ***** (h) [Reserved] ***** (j) * * * (4) [Reserved] §1.382–8T Controlled groups (temporary). (a) through (c)(1) [Reserved] (c)(2) Restoration of value. (c)(3) through (e)(3) [Reserved] (e)(4) Foreign component member. (i) In general. (ii) Exception. (e)(5) through (g) [Reserved] (h) Time and manner of filing election to restore. (1) Statements required. (i) Filing by loss corporation. (ii) Filing by electing member. (iii) Agreement. (2) Special rule for foreign component members. (i) Deemed election to restore full value. (ii) Election not to restore full value. (iii) Agreement. (3) Revocation of election. (i) through (j)(3) [Reserved] (j)(4) Effective date. (i) Applicability date. (ii) Expiration date. ***** §1.382–11T Reporting requirements (temporary). (a) Information statement required. (b) Effective date. (1) Applicability date. (2) Expiration date. Par. 24. Section 1.382–2T is amended by removing and reserving paragraph (a)(2)(ii) to read as follows: §1.382–2T Definition of ownership change under section 382, as amended by the Tax Reform Act of 1986 (temporary). ***** 2006–26 I.R.B.1158June 26, 2006 (a) * * * (2) * * * (ii) [Reserved]. For further guidance, see §1.382–11T(a). ***** Par. 25. Section 1.382–8 is amended as follows: 1. Revising paragraphs (c)(2) and (h). 2. Redesignating paragraph (e)(4) as paragraph (e)(5). 3. Adding new paragraphs (e)(4) and (j)(4). The additions and revisions read as fol- lows: §1.382–8 Controlled groups. ***** (c) * * * (2) [Reserved]. For further guidance, see §1.382–8T(c)(2). ***** (e) * * * (4) [Reserved]. For further guidance, see §1.382–8T(e)(4). (5) Predecessor and successor corpora- tion. *** ***** (h) [Reserved]. For further guidance, see §1.382–8T(h). ***** (j) * * * (4) [Reserved]. For further guidance, see §1.382–8T(j)(4)(i). Par. 26. Section 1.382–8T is added to read as follows: §1.382–8T Controlled groups (temporary). (a) through (c)(1) [Reserved]. For fur- ther guidance, see §1.382–8(a) through (c)(1). (2)Restoration of value. After the value of the stock of each component member is reduced pursuant to paragraph (c)(1) of §1.382–8, the valueof the stock of each component member is increased by the amount of value, if any, restored to the component member by another component member (the electing member) pursuant to this paragraph (c)(2). The electing mem- ber may elect (or may be deemed to elect under paragraph (h)(2)(i) of this section in the case of a foreign component mem- ber) to restore value to another component member in an amount that does not exceed the lesser of— (i) The sum of— (A) The value, determined immediately before the ownership change, of the elect- ing member’s stock (after adjustment un- der paragraph (c)(1) of §1.382–8 and be- fore any restoration of value under this paragraph (c)(2)); plus (B) Any amount of value restored to the electing member by another compo- nent member under this paragraph (c)(2); or (ii) The value, determined immediately before any ownership change, of the elect- ing member’s stock (without regard to any adjustment under this section) that is directly owned by the other component member immediately after the ownership change. (c)(3) through (e)(3) [Reserved]. For further guidance, see §1.382–8(c)(3) through (e)(3). (4)Foreign component member—(i) In general. Except as provided in paragraph (e)(4)(ii) of this section, foreign compo- nent member means a component member that is a foreign corporation. (ii)Exception. A foreign component member shall not include a foreign corpo- ration that has items treated as connected with the conduct of a trade or business in the United States that it takes into account in determining its value pursuant to section 382(e)(3). (e)(5) through (g) [Reserved]. For fur- ther guidance, see §1.382–8(e)(5) through (g). (h)Time and manner of filing election to restore—(1)Statements required— (i)Filing by loss corporation.The election to restore value described in para- graph (c)(2) of this section must be in the form set forth in this paragraph (h)(1)(i). It mustbefiledbythelosscorporationbyin- cluding a statement on or with its income tax return for the taxable year in which the ownership change occurs (or with an amended return for that year filed on or before the due date (including extensions) of the income tax return of any component member with respect to the taxable year in which the ownership change occurs). The common parent of a consolidated group must make the election on behalf of the group. The election is made in the form of a statement entitled, “STATEMENT PUR- SUANT TO §1.382–8T(h)(1) TO ELECT TO RESTORE ALL OR PART OF THE VALUE OF [INSERT NAME AND EM- PLOYER IDENTIFICATION NUMBER (IF ANY) OF THE ELECTING MEM- BER] TO [INSERT NAME AND EM- PLOYER IDENTIFICATION NUMBER (IF ANY) OF THE CORPORATION TO WHICH VALUE IS RESTORED].” The statement must include the amount of the value being restored and must also indi- cate that an agreement signed and dated by both parties, as described in paragraph (h)(1)(iii) of this section, has been entered into. Each such party must retain either the original or a copy of this agreement as part of its records. See §1.6001–1(e). (ii)Filing by electing member.An electing member must include a statement identical to the one described in paragraph (h)(1)(i)ofthissectiononorwithits income tax return (or with an amended re- turn for that year filed on or before the due date (including extensions) of the income tax return of any component member with respect to the taxable year in which the ownership change occurs) (if any) for the taxable year which includes the change date in connection with which the elec- tion described in paragraph (c)(2) of this section is made. If the electing member is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. It is not necessary for the electing member (or the United States shareholder, as the case may be) to include this statement on or with its return if the loss corporation includes an identical statement on or with the same return for the same election. (iii)Agreement. Both the electing member and the corporation to which value is restored must sign and date an agreement. The agreement must— (A) Identify the change date for the loss corporation in connection with which the election is made; (B) State the value of the electing member’s stock (without regard to any ad- justment under paragraphs (c)(1), (c)(3), (c)(4) and (c)(5) of §1.382–8 and para- graph (c)(2) of this section) immediately before the ownership change; (C) State the amount of any reduc- tion required under paragraph (c)(1) of §1.382–8 with respect to stock of the electing member that is owned directly June 26, 200611592006–26 I.R.B. or indirectly by the corporation to which value is restored; (D) State the amount of value that the electing member elects to restore to the corporation; and (E)Statewhetherthevalueofeither component member’s stock was adjusted pursuant to paragraph (c)(4) of §1.382–8. (2)Special rule for foreign component members—(i)Deemed election to restore full value. Unless the election described in paragraph (h)(2)(ii) of this section is made for a foreign component member, each foreign component member of the controlled group is deemed to have elected to restore to each other component mem- ber the maximum value allowable under paragraph (c)(2) of this section, taking into account the limitations of §1.382–8. (ii)Election not to restore full value. (A) A loss corporation may elect to reduce the amount of value restored from a for- eign component member (the electing for- eign component member) to another com- ponent member under paragraph (h)(2)(i) of this section in the form set forth in this paragraph (h)(2)(ii). It must be filed by the loss corporation by including a state- ment on or with its income tax return for the taxable year in which the ownership change occurs (or with an amended return for that year filed on or before the due date (including extensions) of the income tax return of any component member with respect to the taxable year in which the ownership change occurs). The common parent of a consolidated group must make the election on behalf of the group. The election is made in the form of a statement entitled, “STATEMENT PURSUANT TO §1.382–8T(h)(2)(ii) TO ELECT NOT TO RESTORE FULL VALUE OF [IN- SERT NAME AND EMPLOYER IDEN- TIFICATION NUMBER (IF ANY) OF ELECTING FOREIGN COMPONENT MEMBER] TO [INSERT NAME AND EMPLOYER IDENTIFICATION NUM- BER (IF ANY) OF THE CORPORATION TO WHICH SUCH VALUE IS NOT TO BE RESTORED].” The statement must include the amount of the value not being restored and must also indicate that an agreement signed and dated by both par- ties, as described in paragraph (h)(2)(iii) of this section, has been entered into. Each such party must retain either the original or a copy of the agreement as part of its records. See §1.6001–1(e). (B)Anelectingforeign component member must include a statement iden- tical to the one described in paragraph (h)(2)(ii)(A) of this section on or with its income tax return (or with an amended return for that year filed on or before the due date (including extensions) of the income tax return of any component member with respect to the taxable year in which the ownership change occurs) (if any) for the taxable year which in- cludes the change date in connection with which the election described in paragraph (h)(2)(ii)(A) of this section is made. If the electing foreign component member is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. It is not necessary for the electing foreign component member (or United States shareholder, as the case may be) to include this statement on or with its return if the loss corporation includes an identical statement on or with the same return for the same election. (iii)Agreement. Both the electing for- eign component member and the corpora- tion to which full value is not restored must sign and date an agreement. The agree- ment must— (A) Identify the change date for the loss corporation in connection with which the election is made; (B) State the value of the electing for- eign component member’s stock (without regard to any adjustment under paragraphs (c)(1), (c)(3), (c)(4) and (c)(5) of §1.382–8 and paragraph (c)(2) of this section) imme- diately before the ownership change; (C) State the amount of any reduc- tion required under paragraph (c)(1) of §1.382–8 with respect to stock of the electing foreign component member that is owned directly or indirectly by the cor- poration to which value is not restored; (D) State the amount of value that the electing foreign component member elects not to restore to the corporation; and (E)Statewhetherthevalueofeither component member’s stock was adjusted pursuant to paragraph (c)(4) of §1.382–8. (3)Revocation of election. An election (other than the deemed election described in paragraph (h)(2)(i) of this section) made under this section is revocable only with the consent of the Commissioner. (i) through (j)(3) [Reserved]. For fur- ther guidance, see §1.382–8(i) through (j)(3). (4)Effective date—(i)Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such origi- nal return) timely filed on or after May 30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. §1.382–11 [Removed] Par. 27. Section 1.382–11 is removed. Par. 28. Section 1.382–11T is added to read as follows: §1.382–11T Reporting requirements (temporary). (a)Information statement required.A loss corporation must include a statement entitled, “STATEMENT PURSUANT TO §1.382–11T(a) BY [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER OF TAXPAYER], A LOSS CORPORATION,” on or with its income tax return for each taxable year that it is a loss corporation in which an owner shift, equity structure shift or other trans- action described in paragraph (a)(2)(i) of §1.382–2T occurs. The statement must include the date(s) of any owner shifts, equity structure shifts, or other transac- tions described in paragraph (a)(2)(i) of §1.382–2T, the date(s) on which any own- ership change(s) occurred, and the amount of any attributes described in paragraph (a)(1)(i) of §1.382–2 that caused the cor- poration to be a loss corporation. A loss corporation may also be required to in- clude certain elections on this statement, including— (1)Anelectionmadeunder §1.382–2T(h)(4)(vi)(B) to disregard the deemed exercise of an option if the actual exercise of that option occurred within 120 days of the ownership change; and (2)Anelectionmadeunder §1.382–6(b)(2) to close the books of the loss corporation for purposes of allo- cating income and loss to periods before and after the change date for purposes of section 382. (b)Effective date—(1)Applicability date. This section applies to any original 2006–26 I.R.B.1160June 26, 2006 Federal income tax return (including any amendedreturnfiledonorbeforethedue date (including extensions) of such origi- nal return) timely filed on or after May 30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. §1.1081–11 [Removed] Par. 29. Section 1.1081–11 is removed. Par. 30. Section 1.1081–11T is added to read as follows: §1.1081–11T Records to be kept and information to be filed with returns (temporary). (a)Distributions and exchanges; signif- icant holders of stock or securities.Every significant holder must include a statement entitled, “STATEMENT PURSUANT TO §1.1081–11T(a) BY [INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A SIGNIFICANT HOLDER,” on or with such holder’s income tax return for the taxable year in which the distribution or exchange occurs. If a significant holder is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must include— (1) The name and employer identifi- cation number (if any) of the corporation from which the stock, securities, or other property (including money) was received by such significant holder; (2) The aggregate basis, determined immediately before the exchange, of any stock or securities transferred by the sig- nificant holder in the exchange, and the aggregate fair market value, determined immediately before the distribution or ex- change, of the stock, securities or other property (including money) received by the significant holder in the distribution or exchange; and (3) The date of the distribution or ex- change. (b)Distributions and exchanges; cor- porations subject to Commission orders. Each corporation which is a party to a dis- tribution or exchange made pursuant to an order of the Commission must include on or with its income tax return for its taxable year in which the distribution or exchange takes place a statement entitled, “STATE- MENT PURSUANT TO §1.1081–11T(b) BY [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A DISTRIBUTING OR EXCHANGING CORPORATION.” If the distributing or exchanging corporation is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must include— (1) The date and control number of the Commission order, pursuant to which the distribution or exchange was made; (2) The names and taxpayer identifi- cation numbers (if any) of the significant holders; (3) The aggregate fair market value and basis, determined immediately before the distribution or exchange, of the stock, securities, or otherproperty (including money) transferred in the distribution or exchange; and (4) The date of the distribution or ex- change. (c)Sales by members of system groups. Each system group member must in- clude a statement entitled, “STATEMENT PURSUANT TO §1.1081–11T(c) BY [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A SYSTEM GROUP MEMBER,” on or with its income tax return for the taxable year in which the sale is made. If any system group member is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must include— (1) The dates and control numbers of all relevant Commission orders; (2) The aggregate fair market value and basis, determined immediately before the sale, of all stock or securities sold; and (3) The date of the sale. (d)Definitions. (1) For purposes of this section,Commissionmeans the Securities and Exchange Commission. (2) For purposes of this section,signif- icant holdermeans a person that receives stock or securities from a corporation (the distributing corporation) pursuant to an or- der of the Commission, if, immediately be- fore the transaction, such person— (i) In the case of stock— (A) Owned at least five percent (by vote or value) of the total outstanding stock of the distributing corporation if the stock owned by such person is publicly traded, or (B) Owned at least one percent (by vote or value) of the total outstanding stock of the distributing corporation if the stock owned by such person is not publicly traded; or (ii) In the case of securities, owned se- curities of the distributing corporation with a basis of $1,000,000 or more. (3)Publicly traded stockmeans stock that is listed on— (i) A national securities exchange regis- tered under section 6 of the Securities Ex- change Act of 1934 (15 U.S.C. 78f); or (ii) An interdealer quotation system sponsored by a national securities asso- ciation registered under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o–3). (4) For purposes of paragraph (b) of this section,exchangemeans exchange, expen- diture, or investment. (5) For purposes of paragraph (c) of this section,system group membermeans each corporation which is a member of a system group and which, pursuant to an order of the Commission, sells stock or securities received upon an exchange (pursuant to an order of the Commission) and applies the proceeds derived therefrom in retirement or cancellation of its own stock or securi- ties. (e)Substantiation information. Under §1.6001–1(e), taxpayers are required to retain their permanent records and make such records available to any authorized Internal Revenue Service officers and em- ployees. In connection with the distribu- tion or exchange described in this section, these records should specifically include information regarding the amount, basis, and fair market value of all property dis- tributed or exchanged, and relevant facts regarding any liabilities assumed or extin- guished as part of such distribution or ex- change. (f)Effective date—(1)Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such origi- nal return) timely filed on or after May 30, 2006. June 26, 200611612006–26 I.R.B. (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 31. Section 1.1221–2 is amended by revising paragraph (e)(2)(iv) and adding paragraphs (i) through (j) to read as follows: §1.1221–2 Hedging transactions. ***** (e) * * * (2) * * * (iv) [Reserved]. For further guidance, see §1.1221–2T(e)(2)(iv). ***** (i) through (j) [Reserved]. For fur- ther guidance, see §1.1221–2T(i) through (j)(1). Par. 32. Section 1.1221–2T is added to read as follows: §1.1221–2T Hedging transactions (temporary). (a) through (e)(2)(iii) [Reserved]. For further guidance, see §1.1221–2(a) through (e)(2)(iii). (iv)Making and revoking the elec- tion. Unless the Commissioner otherwise prescribes, the election described in para- graph (e)(2) of §1.1221–2 must be made in a separate statement that provides, “[IN- SERT NAME AND EMPLOYER IDEN- TIFICATION NUMBER OF COMMON PARENT] HEREBY ELECTS THE AP- PLICATION OF §1.1221–2(e)(2) (THE SEPARATE-ENTITY APPROACH).” The statement must also indicate the date as of which the election is to be effective. The election must be filed by including the statement on or with the consolidated group’s income tax return for the taxable year that includes the first date for which the election is to apply. The election ap- plies to all transactions entered into on or after the date so indicated. The election may only be revoked with the consent of the Commissioner. (e)(3) through (h) [Reserved]. For further guidance, see §1.1221–2(e)(3) through (h). (i) [Reserved] (j)Effective date—(1)Applicability date. This section applies to any original consolidated Federal income tax return due (without extensions) after May 30, 2006. However, a consolidated group may apply this section to any original consoli- dated Federal income tax return (including any amended return filed on or before the due date (including extensions) of such original return) timely filed on or after May 30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 33. Section 1.1502–13 is amended by revising paragraphs (f)(5)(ii)(E) and (f)(6)(i)(C)(2) and adding paragraph (m) to read as follows: §1.1502–13 Intercompany transactions. ***** (f) * * * (5) * * * (ii) * * * (E) [Reserved]. For further guidance, see §1.1502–13T(f)(5)(ii)(E). (6) * * * (i) * * * (C)*** (2) [Reserved]. For further guidance, see §1.1502–13T(f)(6)(i)(C)(2). ***** (m) [Reserved]. For further guidance, see §1.1502–13T(m)(1). Par. 34. Section 1.1502–13T is added to read as follows: §1.1502–13T Intercompany transactions (temporary). (a) through (f)(5)(ii)(D) [Reserved]. For further guidance, see §1.1502–13(a) through (f)(5)(ii)(D). (E)Election.Anelectiontoapplypara- graph (f)(5)(ii) of §1.1502–13 is made in a separate statement entitled, “[INSERT NAME AND EMPLOYER IDENTI- FICATION NUMBER OF COMMON PARENT] HEREBY ELECTS THE AP- PLICATION OF §1.1502–13(f)(5)(ii) FOR AN INTERCOMPANY TRANS- ACTION INVOLVING [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER OF S] AND [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER OF T].” A separate election must be made for each such application. The election must be filed by including the statement on or with the consolidated group’s income tax return for the year of T’s liquidation (or other transaction). The Commissioner may impose reasonable terms and conditions to the application of paragraph (f)(5)(ii) of §1.1502–13 that are consistent with the purposes of such section. The statement must— (1) Identify S’s intercompany transac- tion and T’s liquidation (or other transac- tion); and (2) Specify which provision of §1.1502–13(f)(5)(ii) applies and how it alters the otherwise applicable results un- der this section (including, for example, the amount of S’s intercompany items and the amount deferred or offset as a result of §1.1502–13(f)(5)(ii)). (f)(6) through (f)(6)(i)(C)(1)[Re- served]. For further guidance, see §1.1502–13(f)(6) through (f)(6)(i)(C)(1). (2)Election. The election described in paragraph (f)(6)(i)(C)(1) of §1.1502–13 must be made in a separate statement en- titled, “ELECTION TO REDUCE BASIS OF P STOCK UNDER §1.1502–13(f)(6) HELD BY [INSERT NAME AND EM- PLOYER IDENTIFICATION NUMBER OF MEMBER WHOSE BASIS IN P STOCK IS REDUCED].” The election must be filed by including the statement on or with the consolidated group’s in- come tax return for the year in which the nonmember becomes a member. The statement must identify the member’s ba- sis in the P stock (taking into account the effect of this election) and the number of shares of P stock held by the member. (f)(6)(ii) through (l) [Reserved]. For further guidance, see §1.1502–13(f)(6)(ii) through (l). (m)Effective date—(1)Applicability date. This section applies to any original consolidated Federal income tax return due (without extensions) after May 30, 2006. However, a consolidated group may apply this section to any original consoli- dated Federal income tax return (including anyamendedreturnfiledonorbeforethe due date (including extensions) of such original return) timely filed on or after May 30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 35. Section 1.1502–31 is amended by revising paragraph (e)(2) and adding paragraphs (i) through (j) to read as fol- lows: §1.1502–31 Stock basis after a group structure change. ***** 2006–26 I.R.B.1162June 26, 2006 (e) * * * (2) [Reserved]. For further guidance, see §1.1502–31T(e)(2). ***** (i) through (j) [Reserved]. For further guidance, see §1.1502–31T(i) through (j)(1). Par. 36. Section 1.1502–31T is added to read as follows: §1.1502–31T Stock basis after a group structure change (temporary). (a) through (e)(1) [Reserved]. For fur- ther guidance, see §1.1502–31(a) through (e)(1). (2)Election. The election described in paragraph (e)(1) of §1.1502–31 must be made in a separate statement enti- tled, “ELECTION TO TREAT LOSS CARRYOVER AS EXPIRING UNDER §1.1502–31(e).” The election must be filed by including the statement on or with the consolidated group’s income tax re- turn for the year that includes the group structure change. The statement must identify the amount of each loss carryover deemed to expire (or the amount of each loss carryover deemed not to expire, with any balance of any loss carryovers being deemed to expire). (f) through (h) [Reserved]. For further guidance, see §1.1502–31(f) through (h). (i) [Reserved] (j)Effective date—(1)Applicability date. This section applies to any original consolidated Federal income tax return due (without extensions) after May 30, 2006. However, a consolidated group may apply this section to any original consoli- dated Federal income tax return (including anyamendedreturnfiledonorbeforethe due date (including extensions) of such original return) timely filed on or after May 30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 37. Section 1.1502–32 is amended by revising paragraph (b)(4)(iv) and adding paragraphs (i) through (j) to read as follows: §1.1502–32 Investment adjustments. ***** (b) * * * (4) * * * (iv) [Reserved]. For further guidance, see §1.1502–32T(b)(4)(iv). ***** (i) through (j) [Reserved]. For further guidance, see §1.1502–32T(i) through (j)(1). Par. 38. Section 1.1502–32T is added to read as follows: §1.1502–32T Investment adjustments (temporary). (a) through (b)(4)(iii) [Reserved]. For further guidance, see §1.1502–32(a) through (b)(4)(iii). (iv)Election. The election described in paragraph (b)(4) of §1.1502–32 must be made in a separate statement entitled, “ELECTION TO TREAT LOSS CAR- RYOVER OF [INSERT NAME AND EMPLOYER IDENTIFICATION NUM- BER OF S] AS EXPIRING UNDER §1.1502–32(b)(4).” The election must be filed by including a statement on or with the consolidated group’s income tax re- turn for the year S becomes a member. A separate statement must be made for each member whose loss carryover is deemed to expire. The statement must identify the amount of each loss carryover deemed to expire (or the amount of each loss carryover deemed not to expire, with any balance of any loss carryovers being deemed to expire) and the basis of any stock reduced as a result of the deemed expiration. (b)(4)(v) through (h) [Reserved]. For further guidance, see §1.1502–32(b)(4)(v) through (h). (i) [Reserved] (j)Effective date—(1)Applicability date. This section applies to any original consolidated Federal income tax return due (without extensions) after May 30, 2006. However, a consolidated group may apply this section to any original consoli- dated Federal income tax return (including any amended return filed on or before the due date (including extensions) of such original return) timely filed on or after May 30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 39. Section 1.1502–33 is amended by revising paragraph (d)(5)(i)(D) and adding paragraph (k) to read as follows: §1.1502–33 Earnings and profits. ***** (d) * * * (5) * * * (i) * * * (D) [Reserved]. For further guidance, see §1.1502–33T(d)(5)(i)(D). ***** (k) [Reserved]. For further guidance, see §1.1502–33T(k)(1). Par. 40. Section 1.1502–33T is added to read as follows: §1.1502–33T Earnings and profits (temporary). (a) through (d)(5)(i)(C) [Reserved]. For further guidance, see §1.1502–33(a) through (d)(5)(i)(C). (D) If a method is permitted under para- graph (d)(4) of §1.1502–33, provide the date and control number of the private let- ter ruling issued by the Internal Revenue Service approving such method. (d)(5)(ii) through (j) [Reserved]. For further guidance, see §1.1502–33(d)(5)(ii) through (j). (k)Effective date—(1)Applicability date. This section applies to any original consolidated Federal income tax return due (without extensions) after May 30, 2006. However, a consolidated group may apply this section to any original consoli- dated Federal income tax return (including anyamendedreturnfiledonorbeforethe due date (including extensions) of such original return) timely filed on or after May 30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 41. Section 1.1502–35 is amended by revising paragraph (c)(4)(i) and adding paragraph (k) to read as follows: §1.1502–35 Transfers of subsidiary stock and deconsolidations of subsidiaries. ***** (c) * * * (4) * * * (i) [Reserved]. For further guidance, see § 1.1502–35T(c)(4)(i). ***** (k) [Reserved]. For further guidance, see §1.1502–35T(k)(1). June 26, 200611632006–26 I.R.B. Par. 42. Section 1.1502–35T is added to read as follows: §1.1502–35T Transfers of subsidiary stock and deconsolidations of subsidiaries (temporary). (a) through (c)(3) [Reserved]. For fur- ther guidance, see § 1.1502–35(a) through (c)(3). (4)Reduction of suspended loss—(i) General rule. The amount of any loss sus- pended pursuant to paragraphs (c)(1) and (c)(2) of §1.1502–35 shall be reduced, but not below zero, by the subsidiary’s (and any successor’s) items of deduction and loss, and the subsidiary’s (and any succes- sor’s) allocable share of items of deduc- tion and loss of all lower-tier subsidiaries, that are allocable to the period beginning on the date of the disposition that gave rise to the suspended loss and ending on the day before the first date on which the subsidiary (and any successor) is not a member of the group of which it was a member immediately prior to the dispo- sition (or any successor group), and that are taken into account in determining con- solidated taxable income (or loss) of such group for any taxable year that includes any date on or after the date of the dispo- sition and before the first date on which the subsidiary (and any successor) is not a member of such group; provided, how- ever, that such reduction shall not exceed the excess of the amount of such items over the amount of such items that are taken into account in determining the basis ad- justments made under §1.1502–32 to stock of the subsidiary (or any successor) owned by members of the group. The preceding sentence shall not apply to items of deduc- tion and loss to the extent that the group can establish that all or a portion of such items was not reflected in the computation of the duplicated loss with respect to the subsidiary on the date of the disposition of stock that gave rise to the suspended loss. (c)(4)(ii) through (j) [Reserved]. For further guidance, see §1.1502–35(c)(4)(ii) through (j). (k)Effective date—(1)Applicability date. This section applies to any original consolidated Federal income tax return due (without extensions) after May 30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 43. Section 1.1502–76 is amended by revising paragraph (b)(2)(ii)(D) and adding paragraph (d) to read as follows: §1.1502–76 Taxable year of members of group. ***** (b) * * * (2) * * * (ii) * * * (D) [Reserved]. For further guidance, see §1.1502–76T(b)(2)(ii)(D). ***** (d) [Reserved]. For further guidance, see §1.1502–76T(d)(1). Par. 44. Section 1.1502–76T is added to read as follows: §1.1502–76T Taxable year of members of group (temporary). (a) through (b)(2)(ii)(C) [Reserved]. For further guidance, see §1.1502–76(a) through (b)(2)(ii)(C). (D)Election—(1)Statement.The election to ratably allocate items un- der paragraph (b)(2)(ii) of §1.1502–76 must be made in a separate statement entitled, “THIS IS AN ELECTION UN- DER §1.1502–76(b)(2)(ii) TO RATABLY ALLOCATE THE YEAR’S ITEMS OF [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER OF THE MEMBER].” The election must be filed by including a statement on or with the returns including the items for the years ending and beginning with S’s change in status. If two or more members of the same consolidated group, as a conse- quence of the same plan or arrangement, cease to be members of that group and remain affiliated as members of another consolidated group, an election under this paragraph (b)(2)(ii)(D)(1) may be made only if it is made by each such mem- ber. Each statement must also indicate that an agreement, as described in para- graph (b)(2)(ii)(D)(2)ofthissection,has been entered into. Each party signing the agreement must retain either the original or a copy of the agreement as part of its records. See §1.6001–1(e). (2)Agreement. For each election un- der paragraph (b)(2)(ii) of §1.1502–76, the member and the common parent of each affected group must sign and date an agree- ment. The agreement must— (i) Identify the extraordinary items, their amounts, and the separate or consol- idated returns in which they are included; (ii) Identify the aggregate amount to be ratably allocated, and the portion of the amount included in the separate and con- solidated returns; and (iii) Include the name and employer identification number of the common par- ent (if any) of each group that must take the items into account. (b)(2)(iii) through (c) [Re- served]. For further guidance, see §1.1502–76(b)(2)(iii) through (c). (d)Effective date—(1)Applicability date. This section applies to any original consolidated Federal income tax return due (without extensions) after May 30, 2006. However, a consolidated group may apply this section to any original consoli- dated Federal income tax return (including anyamendedreturnfiledonorbeforethe due date (including extensions) of such original return) timely filed on or after May 30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 45. Section 1.1502–95 is amended by revising paragraphs (e)(8) and (f) and adding paragraph (g) to read as follows: §1.1502–95 Rules on ceasing to be a member of a consolidated group (or loss subgroup). ***** (e) * * * (8) [Reserved]. For further guidance, see §1.1502–95T(e)(8). (f) through (g) [Reserved]. For fur- ther guidance, see §1.1502–95T(f) through (g)(1). Par. 46. Section 1.1502–95T is added to read as follows: §1.1502–95T Rules on ceasing to be a member of a consolidated group (or loss subgroup) (temporary). (a) through (e)(7) [Reserved]. For fur- ther guidance, see §1.1502–95(a) through (e)(7). (8)Reporting requirements—(i)Com- mon Parent. Except as provided in para- graph (e)(8)(iii) of this section, if a net unrealized built-in loss is allocated under paragraph (e) of §1.1502–95, the common parent must include a statement entitled, 2006–26 I.R.B.1164June 26, 2006 “STATEMENT OF NET UNREALIZED BUILT-IN LOSS ALLOCATION PUR- SUANT TO §1.1502–95(e),” on or with its income tax return for the taxable year in which the former member(s) (or a new loss subgroup that includes that member) ceases to be a member. The statement must include— (A) The name and employer identifica- tion number of the departing member; (B) The amount of the remaining NUBIL balance for the taxable year in which the member departs; (C) The amount of the net unrealized built-in loss allocated to the departing member; and (D) A representation that the common parent has delivered a copy of the state- ment to the former member (or the com- mon parent of the group of which the for- mermemberisamember)onorbeforethe day the group files its income tax return for the consolidated return year that the former member ceases to be a member. (ii)Former Member. Except as pro- vided in paragraph (e)(8)(iii) of this sec- tion, the former member must include a statement on or with its first income tax re- turn (or the first return in which the former member joins) that is filed after the close of the consolidated return year of the group of which the former member (or a new loss subgroup that includes that member) ceases to be a member. The statement will be identical to the statement filed by the common parent under paragraph (e)(8)(i) of this section except that instead of in- cluding the information described in para- graph (e)(8)(i)(A) of this section the for- mer member must provide the name, em- ployer identification number and tax year of the former common parent, and instead of the representation described in para- graph (e)(8)(i)(D) of this section the for- mer member must represent that it has re- ceived and retained the copy of the state- ment delivered by the common parent as part of its records. See §1.6001–1(e). (iii)Exception. This paragraph (e)(8) does not apply if the required information (other than the amount of the remaining NUBIL balance) is included in a statement of election under paragraph (f) of this sec- tion (relating to apportioning a section 382 limitation). (f)Filingtheelectiontoapportionthe section 382 limitation and net unrealized built-in gain—(1)Form of the election to apportion—(i)Statement. An elec- tion under paragraph (c) of §1.1502–95 must be made in the form set forth in this paragraph (f)(1)(i). The election must be made by the common parent and the party described in paragraph (f)(2) of this section. It must be filed in accordance with paragraph (f)(3) of this section and be entitled, “THIS IS AN ELECTION UNDER §1.1502–95 TO APPORTION ALLORPARTOFTHE[INSERTTHE CONSOLIDATED SECTION 382 LIM- ITATION, THE SUBGROUP SECTION 382 LIMITATION, THE LOSS GROUP’S NET UNREALIZED BUILT-IN GAIN, OR THE LOSS SUBGROUP’S NET UNREALIZED BUILT-IN GAIN, AS APPROPRIATE] IN THE AMOUNT OF [INSERT THE AMOUNT OF THE LOSS LIMITATION OR NET UNRE- ALIZED BUILT-IN GAIN] TO [INSERT NAME(S) AND EMPLOYER IDENTI- FICATION NUMBER(S) OF THE COR- PORATION (OR THE CORPORATIONS THAT COMPOSE A NEW LOSS SUB- GROUP) TO WHICH ALLOCATION IS MADE].” The statement must also indi- cate that an agreement, as described in paragraph (f)(1)(ii) of this section, has been entered into. (ii)Agreement. Both the common par- ent and the party described in paragraph (f)(2) of this section must sign and date the agreement. The agreement must include, as appropriate— (A) The date of the ownership change that resulted in the consolidated section 382 limitation (or subgroup section 382 limitation) or the loss group’s (or loss sub- group’s) net unrealized built-in gain; (B) The amount of the departing mem- ber’s (or loss subgroup’s) pre-change net operating loss carryovers and the taxable years in which they arose that will be sub- ject to the limitation that is being appor- tioned to that member (or loss subgroup); (C) The amount of any net unrealized built-in loss allocated to the departing member (or loss subgroup) under para- graph (e) of §1.1502–95, which, if rec- ognized, can be a pre-change attribute subject to the limitation that is being ap- portioned; (D) If a consolidated section 382 limita- tion (or subgroup section 382 limitation) is being apportioned, the amount of the con- solidated section 382 limitation (or sub- group section 382 limitation) for the tax- able year during which the former member (or new loss subgroup) ceases to be a mem- ber of the consolidated group (determined without regard to any apportionment under this section); (E) If any net unrealized built-in gain is being apportioned, the amount of the loss group’s (or loss subgroup’s) net unrealized built-in gain (as determined under para- graph (c)(2)(ii) of §1.1502–95) that may be apportioned to members that ceased to be members during the consolidated return year; (F) The amount of the value element and adjustment element of the consoli- dated section 382 limitation (or subgroup section 382 limitation) that is appor- tioned to the former member (or new loss subgroup) pursuant to paragraph (c) of §1.1502–95; (G) The amount of the loss group’s (or loss subgroup’s) net unrealized built-in gain that is apportioned to the former member (or new loss subgroup) pursuant to paragraph (c) of §1.1502–95; (H) If the former member is allocated any net unrealized built-in loss under para- graph (e) of §1.1502–95, the amount of any adjustment element apportioned to the former member that is attributable to recognized built-in gains (determined in a manner that will enable both the group and the former member to apply the principles of §1.1502–93(c)); and (I) The name and employer identifica- tion number of the common parent making the apportionment. (2)Signing the agreement. The agree- ment must be signed by both the common parent and the former member (or, in the case of a loss subgroup, the common par- ent and the loss subgroup parent) by per- sons authorized to signtheir respective in- come tax returns. If the allocation is made to a loss subgroup for which an election under §1.1502–91(d)(4) is made, and not separately to its members, the agreement under this paragraph (f) must be signed by the common parent and any member of the new loss subgroup by persons autho- rized to sign their respective income tax returns. Each party signing the agreement must retain either the original or a copy of the agreement as part of its records. See §1.6001–1(e). (3)Filing of the election—(i)Filing by the common parent. The election must be filed by the common parent of the group June 26, 200611652006–26 I.R.B. that is apportioning the consolidated sec- tion 382 limitation (or the subgroup sec- tion 382 limitation) or the loss group’s net unrealized built-in gain (or loss subgroup’s net unrealized built-in gain) by including the statement on or with its income tax re- turn for the taxable year in which the for- mer member (or new loss subgroup) ceases tobeamember. (ii)Filing by the former member.An identical statement must be included on or with the first return of the former mem- ber (or the first return in which the former member, or the members of a new loss sub- group, join) that is filed after the close of the consolidated return year of the group of which the former member (or the mem- bers of a new loss subgroup) ceases to be amember. (4)Revocation of election. An elec- tion statement made under paragraph (c) of §1.1502–95 is revocable only with the consent of the Commissioner. (g)Effective date—(1)Applicability date. This section applies to any original consolidated Federal income tax return due (without extensions) after May 30, 2006. However, a consolidated group may apply this section to any original consoli- dated Federal income tax return (including anyamendedreturnfiledonorbeforethe due date (including extensions) of such original return) timely filed on or after May 30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 47. Section 1.1563–1 is amended by revising paragraph (c)(2) and adding paragraph (e) to read as follows: §1.1563–1 Definition of controlled group of corporations and component members. ***** (c) * * * (2)(i) through (iii) [Reserved]. For further guidance, see §1.1563–1T(c)(2)(i) through (iii). ***** (e) [Reserved]. For further guidance, see §1.1563–1T(e)(1). ***** Par. 48. Section 1.1563–1T is added to read as follows: §1.1563–1T Definition of controlled group of corporations and component members (temporary). (a) through (c)(1) [Reserved]. For fur- ther guidance, see §1.1563–1(a) through (c)(1). (2)Brother-sister controlled groups— (i)One corporation. If on a December 31, a corporation would, without the ap- plication of this paragraph (c)(2), be a component member of more than one brother-sister controlled group on such date, the corporation will be treated as a component member of only one such group on such date. Such corporation may elect the group in which it is to be included by including on or with its income tax re- turn for the taxable year that includes such date a statement entitled, “STATEMENT TO ELECT CONTROLLED GROUP PURSUANT TO §1.1563–1T(c)(2).” This statement must include— (A) A description of each of the con- trolled groups in which the corporation could be included. The description must include the name and employer identifica- tion number of each component member of each such group and the stock ownership of the component members of each such group; and (B) The following representation: [IN- SERT NAME AND EMPLOYER IDEN- TIFICATION NUMBER OF CORPORA- TION] ELECTS TO BE TREATED AS A COMPONENT MEMBER OF THE [IN- SERT DESIGNATION OF GROUP]. (ii)Multiple corporations.Ifmorethan one corporation would, without the appli- cation of this paragraph (c)(2), be a compo- nent member of more than one controlled group, those corporations electing to be component members of the same group must file a single statement. The statement must contain the information described in paragraph (c)(2)(i) of this section, plus the names and employer identification num- bers of all other corporations designating the same group. The original statement must be included on or with the original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such return) of the corporation that, among those cor- porations which would (without the ap- plication of this paragraph (c)(2)) belong to more than one group, has the taxable year including such December 31 which ends on the earliest date. That corpora- tion must provide a copy of the statement to each other corporation included in the statement and represent in its statement that it has done so. Either the original or a copy of the statement must be retained by each corporation as part of its records. See §1.6001–1(e). (iii)Election—(A)Election filed.An election filed under thisparagraph (c)(2) is irrevocable and effective until a change in the stock ownership of the corporation re- sults in termination of membership in the controlled group in which such corpora- tion has been included. (B)Election not filed. In the event no election is filed in accordance with the pro- visions of this paragraph (c)(2), then the Internal Revenue Service will determine the group in which such corporation is to be included. Such determination will be binding for all subsequent years unless the corporation files a valid election with re- spect to any such subsequent year or until a change in the stock ownership of the cor- poration results in termination of member- ship in the controlled group in which such corporation has been included. (c)(2)(iv) through (d) [Reserved]. For further guidance, see §1.1563–1(c)(2)(iv) through (d). (e)Effective date—(1)Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such origi- nal return) timely filed on or after May 30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 49. Section 1.1563–3 is amended by revising paragraph (d)(2)(iv) and adding paragraph (e) to read as follows: §1.1563–3 Rules for determining stock ownership. ***** (d) * * * (2) * * * (iv) [Reserved]. For further guidance, see §1.1563–3T(d)(2)(iv). ***** (e) [Reserved]. For further guidance, see §1.1563–3T(e)(1). Par. 50. Section 1.1563–3T is added to read as follows: 2006–26 I.R.B.1166June 26, 2006 §1.1563–3T Rules for determining stock ownership (temporary). (a) through (d)(2)(iii) [Reserved]. For further guidance, see §1.1563–3(a) through (d)(2)(iii). (iv)Statement. If the application of paragraph (d)(2)(ii) or (iii) of §1.1563–3 does not result in a corporation being treated as a component member of only one controlled group of corporations on a December 31, then such corporation will be treated as a component member of only one such group on such date. Such corporation may elect the group in which it is to be included by including on or with its income tax return a state- ment entitled, “STATEMENT TO ELECT CONTROLLED GROUP PURSUANT TO §1.1563–3T(d)(2)(iv).” The statement must include— (A) A description of each of the con- trolled groups in which the corporation could be included. The description must include the name and employer identifica- tion number of each component member of each such group and the stock ownership of the component members of each such group; and (B) The following representation: [IN- SERT NAME AND EMPLOYER IDEN- TIFICATION NUMBER OF CORPORA- TION] ELECTS TO BE TREATED AS A COMPONENT MEMBER OF THE [IN- SERT DESIGNATION OF GROUP]. (v)Election—(A)Election filed.An election filed under paragraph (d)(2)(iv) of this section is irrevocable and effective un- til paragraph (d)(2)(ii) or (iii) of §1.1563–3 applies or until a change in the stock own- ership of the corporation results in ter- minationofmembershipinthecontrolled group in which such corporation has been included. (B)Election not filed. In the event no election is filed in accordance with the provisions of paragraph (d)(2)(iv) of this section, then the Internal Revenue Service will determine the group in which such corporation is to be included. Such de- termination will be binding for all subse- quent years unless the corporation files a valid election with respect to any such sub- sequent year or until a change in the stock ownership of the corporation results in ter- minationofmembershipinthecontrolled group in which such corporation has been included. (d)(3) [Reserved]. For further guid- ance, see §1.1563–3(d)(3). (e)Effective date—(1)Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such origi- nalreturn)timelyfiledonorafterMay30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 51. Section 1.6012–2 is amended by revising paragraph (c) and adding para- graph (k) to read as follows: §1.6012–2 Corporations required to make returns of income. ***** (c) [Reserved]. For further guidance, see §1.6012–2T(c). ***** (k) [Reserved]. For further guidance, see §1.6012–2T(k)(1). Par. 52. Section 1.6012–2T is added to read as follows: §1.6012–2T Corporations required to make returns of income (temporary). (a) through (b) [Reserved]. For further guidance, see §1.6012–2(a) through (b). (c)Insurance companies—(1)Domes- tic life insurance companies—(i)In gen- eral. A life insurance company subject to tax under section 801 shall make a re- turn on Form 1120L. Except as provided in paragraph (c)(4) of this section, such com- pany shall file with its return— (A) A copy of its annual statement which shows the reserves used by the company in computing the taxable income reported on its return; and (B) A copy of Schedule A (real estate) and of Schedule D (bonds and stocks), or any successor thereto, of such annual state- ment. (ii)Mutual savings banks.Mutual savings banks conducting life insurance business and meeting the requirements of section 594 are subject to partial tax computed on Form 1120 and partial tax computed on Form 1120L. The Form 1120L is attached as a schedule to Form 1120, together with the annual statement and schedules required to be filed with Form 1120L. (2)Domestic nonlife insurance compa- nies. Every domestic insurance company other than a life insurance company shall make a return on Form 1120PC. This in- cludes organizations described in section 501(m)(1) that provide commercial-type insurance and organizations described in section 833. Except as provided in para- graph (c)(4) of this section, such company shall file with its return a copy of its annual statement (or apro formaannual state- ment), including the underwriting and in- vestment exhibit for the year covered by such return. (3)Foreign insurance companies.The provisions of paragraphs (c)(1) and (c)(2) of this section concerning the returns and statements of insurance companies subject to tax under section 801 or section 831 also apply to foreign insurance companies sub- ject to tax under those sections, except that the copy of the annual statement required to be submitted with the return shall, in the case of a foreign insurance company that is not required to file an annual statement, be a copy of thepro formaannual state- ment relating to the United States business of such company. (4)Exception for insurance companies filing their Federal income tax returns electronically. If an insurance company described in paragraph (c)(1), (c)(2), or (c)(3) of this section files its Federal in- come tax return electronically, it should not include on or with such return its annual statement (orpro formaannual statement), or any portion thereof. Such statement must be available at all times for inspection by authorized Internal Revenue Service officers or employees and retained for so long as such statements may be ma- terial in the administration of any internal revenue law. See §1.6001–1(e). (5)Definition. For purposes of this sec- tion, the termannual statement means the annual statement, the form of which is ap- proved by the National Association of In- surance Commissioners (NAIC), which is filed by an insurance company for the year with the insurance departments of States, Territories, and the District of Columbia. The term annual statement also includes apro formaannual statement if the insur- ance company is not required to file the NAIC annual statement. (d)through(j)[Reserved]. Forfurther guidance, see §1.6012–2(d) through (j). June 26, 200611672006–26 I.R.B. (k)Effective date—(1)Applicability date. This section applies to any original Federal income tax return (including any amendedreturnfiledonorbeforethedue date (including extensions) of such origi- nalreturn)timelyfiledonorafterMay30, 2006. (2)Expiration date. The applicability of this section will expire on May 26, 2009. Par. 53. For each entry in the “Lo- cation” column of the following table, re- move the language in the “Remove” col- umn and add the language in the “Add” column in its place: LocationRemoveAdd The last sentence of the introductory text to §1.302–4 The following rules shall be applicable in determining whether the specific requirements of section 302(c)(2) are met: The rules described in paragraph (a) of §1.302–4T and in paragraphs (b) through (g) of this section apply in determining whether the specific requirements of section 302(c)(2) are met. §1.338(h)(10)–1(f)§1.331–1(d), and §1.332–6§1.331–1T(d) and §1.332–6T The last sentence of §1.382–2T(h)(4)(vi)(B) paragraph (a)(2)(ii) of this sectionparagraph (a) of §1.382–11T The first sentence of §1.382–6(b)(2)(i)§1.382–2T(a)(2)(ii)§1.382–11T(a) The second sentence of §1.382–8(a)paragraph (c) of thissectionparagraphs (c)(1), (c)(3), (c)(4) and (c)(5) of this section and paragraph (c)(2) of §1.382–8T The third sentence of §1.382–8(a)paragraph (c) of thissectionparagraphs (c)(1), (c)(3), (c)(4) and (c)(5) of this section and paragraph (c)(2) of §1.382–8T §1.382–8(c)(3)paragraph (c)(2) of this sectionparagraph (c)(2) of §1.382–8T The first sentence of §1.382–8(c)(4)paragraphs (c)(1), (2), and (3) of this section paragraphs (c)(1) and (c)(3) of this section and paragraph (c)(2) of §1.382–8T §1.382–8(c)(5)this paragraph (c)paragraphs (c)(1), (c)(3), (c)(4), and (c)(5) of this section, and paragraph (c)(2) of §1.382–8T The fifth sentence of §1.382–8(f)paragraph (c) of this sectionparagraphs (c)(1), (c)(3), (c)(4), and (c)(5) of this section, and paragraph (c)(2) of §1.382–8T §1.382–8(g),Example(1)(b)(2)paragraph (c) of this sectionparagraphs (c)(1), (c)(3), (c)(4), and (c)(5) of this section, and paragraph (c)(2) of §1.382–8T The second sentence of §1.382–8(g), Example(1)(c) paragraph (c) of this sectionparagraphs (c)(1), (c)(3), (c)(4), and (c)(5) of this section, and paragraph (c)(2) of §1.382–8T §1.382–8(g),Example(2)(c)paragraph (c)(2) of this sectionparagraph (c)(2) of §1.382–8T The first sentence of §1.382–8(g), Example(2)(e) paragraph (c)(2) of this sectionparagraph (c)(2) of §1.382–8T §1. 382–8(g),Example(3)(b) par agraph (c)(2) of this section par agraph (c)(2) of §1.382–8T §1.382–8(g),Example(3)(c)(1)(B)paragraphs (c)(1) and (2) of thissection paragraph (c)(1) of this section and paragraph (c)(2) of §1.382–8T The second sentence of §1.382–8(g), Example(4)(c) paragraph (c)(2) of this sectionparagraph (c)(2) of §1.382–8T 2006–26 I.R.B.1168June 26, 2006 LocationRemoveAdd The second sentence of §1.382–8(g), Example(5)(c) paragraph (c)(2) of this sectionparagraph (c)(2) of §1.382–8T The first sentence of §1.1502–32(b)(4)(v)(A) paragraph (b)(4)(iv) of this sectionparagraph (b)(4)(iv) of §1.1502–32T The first sentence of §1.1502–32(b)(4)(v)(B) paragraph (b)(4)(iv) of this sectionparagraph (b)(4)(iv) of §1.1502–32T §1.1502–35(c)(4)(ii)(B)§1.1502–76(b)(2)(ii)(D)§1.1502–76T(b)(2)(ii)(D) §1.1502–76(b)(2)(ii)(A)(2)paragraph (b)(2)(ii)(D) of this sectionparagraph (b)(2)(ii)(D) of §1.1502–76T §1.1502–92(e)(1)§1.382–2T(a)(2)(ii)§1.382–11T(a) The first sentence of §1.1502–92(e)(2)§1.382–2T(a)(2)(ii)§1.382–11T(a) The first sentence of §1.1502–94(d)§1.382–2T(a)(2)(ii)§1.382–11T(a) The second sentence of §1.1502–94(d)§1.382–2T(a)(2)(ii)§1.382–11T(a) The last sentence of §1.1502–95(b)(3)paragraph (f) of this sectionparagraph (f) of §1.1502–95T The last sentence of §1.1563–1(c)(2)(iv), Example(1) subdivision (ii) of this subparagraphparagraph (c)(2)(i) of §1.1563–1T The last sentence of §1.1563–1(c)(2)(iv), Example(1) the district director with audit jurisdiction of N’s return the Internal Revenue Service The third sentence of §1.1563–1(c)(2)(iv), Example(2) subdivision (iii) of this subparagraphparagraph (c)(2)(ii) of §1.1563–1T The third sentence of §1.1563–1(c)(2)(iv), Example(2) the district director with audit jurisdiction of the return of the corporation whose taxable year ends on the earliest date the Internal Revenue Service The last sentence of §1.1563–1(c)(2)(iv), Example(2) district directorInternal Revenue Service The second sentence of §1.1563–3(d)(2)(i) subdivisions (ii), (iii), and (iv) of this subparagraph paragraphs (d)(2)(ii) and (iii) of this section, and paragraph (d)(2)(iv) of §1.1563–3T The first sentence of §1.6043–2(a)§1.332–6(b), 1.368–3(a), or 1.1081–11§1.332–6T(a), §1.368–3T(a), or §1.1081–11T The first sentence of §301.6011–5T(a) (twice) §1.6012–2paragraphs (a), (b) and (d) through (j) of §1.6012–2, and paragraph (c) of §1.6012–2T PART 602—OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT Par. 54. The authority citation for part 602 continues to read as follows: Authority: 26 U.S.C. 7805. Par. 55. In §602.101, paragraph (b) is amended to read as follows: 1. The following entries to the table are removed: §602.101 OMB Control numbers. ***** (b) * * * CFR part or section where identified or described Current OMB control No. ***** 1.332–6........................................................... 1545–2019 1.382–11........................................................... 1545–2019 1.351–3........................................................... 1545–2019 1.355–5........................................................... 1545–2019 June 26, 200611692006–26 I.R.B. CFR part or section where identified or described Current OMB control No. 1.368–3........................................................... 1545–2019 1.1081–11........................................................... 1545–2019 ***** 2. The following entries are added in numerical order to the table: §602.101 OMB Control numbers. ***** (b) * * * CFR part or section where identified or described Current OMB control No. ***** 1.302–2T........................................................... 1545–2019 1.302–4T........................................................... 1545–2019 1.331–1T........................................................... 1545–2019 1.332–6T........................................................... 1545–2019 1.338–10T........................................................... 1545–2019 1.351–3T........................................................... 1545–2019 1.355–5T........................................................... 1545–2019 1.368–3T........................................................... 1545–2019 1.381(b)–1T........................................................... 1545–2019 1.382–8T........................................................... 1545–2019 1.382–11T........................................................... 1545–2019 1.1081–11T........................................................... 1545–2019 1.1221–2T........................................................... 1545–2019 1.1502–13T........................................................... 1545–2019 1.1502–31T........................................................... 1545–2019 1.1502–32T........................................................... 1545–2019 1.1502–33T........................................................... 1545–2019 1.1502–35T........................................................... 1545–2019 1.1502–76T........................................................... 1545–2019 1.1502–95T........................................................... 1545–2019 1.1563–1T........................................................... 1545–2019 1.1563–3T........................................................... 1545–2019 1.6012–2T........................................................... 1545–2019 ***** Mark E. Matthews, Deputy Commissioner for Services and Enforcement. Approved May 19, 2006. Eric Solomon, Acting Deputy Assistant Secretary oftheTreasury(TaxPolicy). (Filed by the Office of the Federal Register on May 26, 2006, 8:45 a.m., and published in the issue of the Federal Register for May 30, 2006, 71 F.R. 30591) Section 1563.—Definitions and Special Rules Temporary and proposed regulations simplify, clarify, or eliminate taxpayer reporting burdens. They also eliminate regulatory impediments to the electronic filing of certain statements that taxpayers are required to include on or with their Federal in- come tax returns. See T.D. 9264, page 1150. See REG-134317-05, page 1184. Section 2032A.—Valuation of Certain Farm, etc., Real Property 26 CFR 20.2032A–4: Method of valuing farm real property. Special use value; farms; interest rates.The 2006 interest rates to be used in computing the special use value of farm real property for which an election is made under section 2032A of the Code are listed for estates of decedents. Rev. Rul. 2006–32 This revenue ruling contains a list of the average annual effective interest rates on new loans under the Farm Credit System. This revenue ruling also contains a list of the states within each Farm Credit System Bank Chartered Territory. Under § 2032A(e)(7)(A)(ii) of the In- ternal Revenue Code, rates on new Farm Credit System Bank loans are used in com- puting the special use value of real prop- erty used as a farm for which an election is made under § 2032A. The rates in this revenue ruling may be used by estates that value farmland under § 2032A as of a date in 2006. Average annual effective interest rates, calculated in accordance with 2006–26 I.R.B.1170June 26, 2006 § 2032A(e)(7)(A) and § 20.2032A–4(e) of the Estate Tax Regulations, to be used under § 2032A(e)(7)(A)(ii), are set forth in the accompanying Table of Interest Rates (Table 1). The states within each Farm Credit System Bank Chartered Territory are set forth in the accompanying Table of Farm Credit System Bank Chartered Territories (Table 2). Rev. Rul. 81–170, 1981–1 C.B. 454, contains an illustrative computation of an average annual effective interest rate. The rates applicable for valuation in 2005 are in Rev. Rul. 2005–41, 2005–28 I.R.B. 69. For rate information for years prior to 2005, see Rev. Rul. 2004–63, 2004–2 C.B. 6, and other revenue rulings that are referenced therein. DRAFTING INFORMATION The principal author of this revenue rul- ing is Lane Damazo of the Office of the As- sociate Chief Counsel (Passthroughs and Special Industries). For further informa- tion regarding this revenue ruling, contact Lane Damazo at (202) 622–3090 (not a toll-free call). REV. RUL. 2006–32 TABLE 1 TABLE OF INTEREST RATES (Year of Valuation 2006) Farm Credit System Bank Servicing State in Which Property is LocatedRate AgFirst,FCB ....................................................................... 7.13 AgriBank,FCB ..................................................................... 6.02 CoBank,ACB ...................................................................... 5.19 Texas,FCB ........................................................................ 5.76 U.S.AgBank,FCB.................................................................. 5.73 REV. RUL. 2006–32 TABLE 2 TABLE OF FARM CREDIT SYSTEM BANK CHARTERED TERRITORIES Farm Credit System BankLocation of Property AgFirst,FCB ............................................ Delaware,DistrictofColumbia,Florida,Georgia,Maryland, North Carolina, Pennsylvania, South Carolina, Virginia, West Virginia. AgriBank,FCB .......................................... Arkansas,Illinois,Indiana,Iowa,Kentucky,Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Tennessee, Wisconsin, Wyoming. CoBank,ACB ........................................... Alaska,Connecticut,Idaho,Maine,Massachusetts,Montana, New Hampshire, New Jersey, New York, Oregon, Rhode Island, Vermont, Washington. Texas,FCB.............................................. Alabama,Louisiana,Mississippi,Texas. U.S.Agbank,FCB........................................ Arizona,California,Colorado,Hawaii,Kansas,NewMexico, Nevada, Oklahoma, Utah. Section 6012.—Persons Required to Make Returns of Income Temporary and proposed regulations simplify, clarify, or eliminate taxpayer reporting burdens. They also eliminate regulatory impediments to the electronic filing of certain statements that taxpayers are required to include on or with their Federal in- come tax returns. See T.D. 9264, page 1150. See REG-134317-05, page 1184. Section 6166.—Extension of Time for Payment of Estate Tax Where Estate Consists Largely of Interest in Closely Held Business 26 CFR 20.6166–2: Definition of an interest in a closely held business. Real property interests; closely held business.This ruling updates the guidance provided by Rev. Ruls. 75–365, 75–366, June 26, 200611712006–26 I.R.B. and 75–367, and provides certain safe har- bors and a non-exclusive list of factors that are likely to be relevant in determining whether a deceased owner’s activities with regard to certain real property were suffi- ciently active to support a finding that the real property interestconstitutes a closely held business interest for purposes of sec- tion 6166 of the Code. Rev. Rul. 75–365 revoked and Rev. Rul. 75–367 revoked in part. Rev. Rul. 2006–34 ISSUE Whether the real property interests de- scribed in the situations below constitute interests in a closely held business for pur- poses of section 6166 of the Internal Rev- enue Code. FACTS In each situation, the real property interests are included in the decedent’s gross estate and aggregate in value more than 35 percent of the decedent’s adjusted gross estate within the meaning of section 6166(b)(6). Further, in each situation the only assets that might be part of a closely held business are the interests described. In each situation, the eligibility require- ments of section 6166(b) regarding the number of partners, members, or share- holders or the percentage of capital interest in the partnership or LLC or voting stock in the corporation are satisfied. Situation 1. A died on January 1, 2005. At the time of death, A owned a ten store strip mall titled in A’s name. A personally handled the day-to-day operation, manage- ment and maintenance of the strip mall. A also personally handled most repairs. When A was unable to personally perform a repair, A hired a third party indepen- dent contractor. A selected the contractor and reviewed and approved the work per- formed. Situation 2. B died on February 1, 2005. At the time of death, B owned a small office park titled in B’s name. The office park consisted of five separate two- story buildings, each of which had multiple tenants. B hired DEF Management Cor- poration (DEF), a property management company in which B had no ownership in- terest, to lease, manage, and maintain the office park, and B relied entirely on DEF to provide all necessary services. The pri- mary duties of DEF’s employees consisted of advertising to attract new tenants, show- ing the property to prospective tenants, ne- gotiating and administering leases, collect- ing the monthly rent, and arranging for in- dependent contractors to provide all neces- sary services to maintain the buildings and grounds of the office park, including snow removal, security, and janitorial services. DEF provided a monthly accounting state- ment to B, along with a check for the rental income, net of expenses and fees. Situation 3. Same as Situation 2 except that B owned 20 percent in value of the stock of DEF. Situation 4. C died on April 1, 2005. At the time of death, C’s assets included the one percent general partner interest and a 20 percent limited partnership interest in a limited partnership. The limited partner- ship owned three strip malls that, collec- tively, constituted 85 percent of the value of the limited partnership’s assets. The partnership agreement required C, as the general partner, to provide the limited part- nership with all services necessary to oper- ate the limited partnership’s business, in- cluding daily maintenance to and repairs of the strip malls. From 1992 until death, C received an annual salary from the lim- ited partnership for C’s services as general partner. In performance of C’s obligations under the limited partnership agreement, C (either personally or with the assistance of employees or agents) performed sub- stantial management functions, including collecting rental payments and negotiating leases, performing daily maintenance and repairs (or hiring, reviewing and approving the work of third party independent con- tractors for such work), and making deci- sions regarding periodic renovations of the three strip malls. Situation 5. D died on May 1, 2005. At the time of death, D owned 100 percent of the stock in MNO Corporation (MNO), a dealership in the business of selling auto- mobiles, automotive parts and related sup- plies, and repair services. D made all decisions regardingMNO, including the approval of all advertising and marketing promotions, management and acquisition of inventory, and matters relating to dealer- ship personnel. D also supervised all em- ployees of MNO. In addition to the stock of MNO, D directly owned Real Prop- erty P. Real Property P was constructed for MNO and contained unique features tai- lored to an automobile dealership, includ- ing a showroom and office space and areas for servicing automobiles and storing in- ventory. D leased Real Property P to MNO under a net lease, and MNO’s employees performed all maintenance of and repairs to Real Property P. LAW Section 6166(a)(1) of the Code permits an executor to elect to pay part or all of the estatetaximposedbysection2001intwo or more (but not exceeding ten) equal in- stallments if a decedent was a citizen or resident of the United States on the date of death, and if the value of an interest in a closely held business (the “closely held business amount” as defined in sec- tion 6166(b)(5)) which is included in the decedent’s gross estate exceeds 35 percent of the adjusted gross estate. Section 6166(b)(1) defines the term “in- terest in a closely held business” to mean: A. an interest as a proprietor in a trade or business carried on as a proprietor- ship; B. an interest as a partner in a partnership carrying on a trade or business, if— (i) 20 percent or more of the total capital interest in such partnership is included in determining the gross estate of the decedent, or (ii) such partnership had 45 or fewer partners; or C. stock in a corporation carrying on a trade or business if— (i) 20 percent or more in value of the voting stock of such corporation is included in de- termining the gross estate of the dece- dent, or (ii) such corporation had 45 or fewer shareholders. I.R.C. § 6166(b)(1). The determination as to whether an interest qualifies as an interest in a closely held business under section 6166(b)(1) shall be made as of the time immediately before the decedent’s death. I.R.C. § 6166(b)(2)(A). Thus, a decedent must own an interest in a closely held business immediately before death to be eligible for an extension of time for payment under section 6166. Under section 6166(b)(9)(A), for pur- poses of section 6166(a)(1) and determin- ing the closely held business amount, the value of an interest in a business does not include the value of that portion of the in- terest that is attributable to passive assets 2006–26 I.R.B.1172June 26, 2006 held by the business. The term “passive as- set” is defined in section 6166(b)(9)(B)(i) as any asset other than an asset used in car- ryingonatradeorbusiness. Revenue Ruling 75–366, 1975–2 C.B. 472, involved a decedent whose gross es- tate included farm real estate operated by tenant farmers. The decedent paid 40 per- cent of the expenses, received 40 percent of the crops, and actively participated in important management decisions of the tenant farms. The decedent made almost daily visits to inspect and discuss farm op- erations, and occasionally delivered sup- plies to the tenants. The ruling held that farming under these circumstances was a productive enterprise like a manufacturing enterprise and was distinguishable from the mere management of investment as- sets. Therefore, the decedent’s farm assets constituted an interest in a closely held business for purposes of section 6166. Revenue Ruling 75–365, 1975–2 C.B. 471, also involved a decedent’s interest in real estate. In that ruling, the Service con- sidered a situation in which the decedent individually maintained a fully equipped business office to collect rental payments on commercial and farm rental properties, receive payments on notes receivable, ne- gotiate leases, make occasional loans, and direct by contract the maintenance of the properties. The ruling held that the dece- dent was merely an owner managing in- vestment assets to obtain the income or- dinarily expected from them, and was not conducting a trade orbusiness. Therefore, the commercial and farm rental properties and notes receivable included in the dece- dent’s gross estate did not constitute an in- terest in a closely held business for pur- poses of section 6166. Revenue Ruling 75–367, 1975–2 C.B. 472, held that a decedent’s ownership of 100 percent of the stock of an elect- ing small business corporation that built homes on land owned and developed by the decedent, together with a business office and warehouse used both by the corporation and by the decedent in the land development activities constituted an interest in a closely held business. The ruling held, however, that the eight homes that were owned by the decedent and rented to tenants and for which the decedent collected rents, made the mort- gage payments, and performed necessary repairs and maintenance, did not consti- tute an interest in a closely held business because the decedent’s interest in those homes merely represented an investment. ANALYSIS In order for an interest in a business to qualify as an interest in a closely held business under section 6166, a decedent must conduct an active trade or business, or must hold an interest in a partnership, LLC, or corporation that itself carries on an active trade or business. Based on the definition of a passive asset in sec- tion 6166(b)(9)(B)(i), section 6166 applies only with regard to an active trade or busi- ness, as distinguished from the mere man- agement of investment assets. In determining whether the activities of the decedent, partnership, LLC or corpora- tion constitute an active trade or business, the activities of agents and employees of the decedent, the partnership, LLC or cor- poration are also takeninto consideration. The fact that some of the activities are con- ducted by third parties such as independent contractors who are neither agents nor em- ployees of the decedent, partnership, LLC or corporation, will not prevent the busi- ness from qualifying as an active trade or business so long as these third-party activ- ities are not of such a nature that the ac- tivities of the decedent, partnership, LLC or corporation (and their respective agents and employees) are reduced to the level of merely holding investment property. Often, day-to-day real estate operations and activities are performed by indepen- dent contractors, such as property man- agement companies. If a decedent, part- nership, LLC, or corporation uses an un- related property management company to perform most of the activities associated with the real estate interests, that fact sug- gests that an active trade or business does not exist. To determine whether a decedent’s in- terest in real property is an interest in an asset used in an active trade or business, the Service will consider all the facts and circumstances, including the activities of agents and employees, the activities of management companies or other third par- ties, and the decedent’s ownership interest in any management company or other third party. The Service will consider the following nonexclusive list of factors: •The amount of time the decedent (or agents and employees of the decedent, partnership, LLC, or corporation) de- voted to the trade or business; •Whether an office was maintained from which the activities of the dece- dent, partnership, LLC, or corporation were conducted or coordinated, and whether the decedent (or agents and employees of the decedent, partner- ship, LLC, or corporation) maintained regular business hours for that pur- pose; •The extent to which the decedent (or agents and employees of the decedent, partnership, LLC, or corporation) was actively involved in finding new ten- ants and negotiating and executing leases; •The extent to which the decedent (or agents and employees of the decedent, partnership, LLC, or corporation) pro- vided landscaping, grounds care, or other services beyond the mere fur- nishing of leased premises; •The extent to which the decedent (or agents and employees of the decedent, partnership, LLC, or corporation) per- sonally made, arranged for, performed, or supervised repairs and maintenance to the property (whether or not per- formed by independent contractors), including without limitation painting, carpentry, and plumbing; and •The extent to which the decedent (or agents and employees of the decedent, partnership, LLC, or corporation) han- dled tenant repair requests and com- plaints. No single factor is dispositive of whether a decedent’s activities with re- spect to the real property (or the activities of a partnership, LLC, or corporation through which decedent owns the real property) constitute an interest in a closely held business for purposes of section 6166. HOLDINGS (1) InSituation 1, A provided signifi- cant services to the strip mall tenants. A personally handled the day-to-day oper- ation, management and maintenance of June 26, 200611732006–26 I.R.B. the strip mall. A’s activities went beyond those of a mere investor collecting profits from a passive asset. Moreover, even in situations in which A hired independent contractors to perform repairs that A could not perform personally, A was involved in the selection of the contractors and re- viewed and approved the work performed. Under these circumstances, the use of in- dependent contractors on occasions when A could not personally perform the work does not prevent A’s activities from rising to the level of the conduct of an active trade or business. Thus, A’s ownership of the strip mall qualifies as an interest in a closely held business for purposes of section 6166. (The result would be the same if the strip mall had instead been held in a single-member LLC owned by A, and the LLC were disregarded as an entity that is separate from its owner under §§301.7701–1 through 3 of the Procedure and Administration Regulations.) (2) InSituation 2, in determining whether B was a proprietor carrying on an active trade or business with respect to B’s interest in the office park, the activities of DEF Management Corporation (DEF) and its relationship with B are taken into account. DEF and its employees provided all necessary services for B’s office park. B had no ownership interest in DEF. B’s reliance on DEF to perform all necessary services, B’s lack of any significant par- ticipation in the management or oversight of the property, and B’s lack of any own- ership interest in DEF are all factors that weigh heavily against a finding that the of- fice park was used by B in an active trade or business. Thus, B was not a proprietor in an active trade or business and B’s in- terest in the office park does not qualify as an interest in a closely held business for purposes of section 6166. (3) InSituation 3, DEF provided all necessary services with regard to the man- agement and maintenance of the office park, including advertising to attract new tenants, showing the property to prospec- tive tenants, negotiating and administering leases, collecting the monthly rent, and arranging for third party independent con- tractors to provide all necessary services to maintain the buildings and grounds of the office park, including snow removal, security, and janitorial services. These activities are sufficient to conclude that DEF was actively managing the office park. Because B owned a significant in- terest in DEF, the activities of DEF with regard to the office park allow B’s interest intheofficeparktoqualifyasaninterest in a closely held business for purposes of section 6166. (4) InSituation 4, the determination of whether the limited partnership was carry- ing on a trade or business for purposes of section 6166 is made with reference to the partnership’s activities. Because the lim- ited partnership, rather than C, owned the interest in the strip malls, the nature and level of the activities of the limited partner- ship must be evaluated. The limited part- nership, acting through its general partner C, handled the day-to-day operations and management of the strip malls. The ac- tivities of C on behalf of the limited part- nership included (either personally or with the assistance of employees or agents) per- forming daily maintenance of and repairs to the strip malls (or hiring, reviewing and approving the work of third party indepen- dent contractors for such work), collecting rental payments, negotiating leases, and making decisions regarding periodic ren- ovations of the strip malls. Thus, the lim- ited partnership carried on an active trade or business. Because the strip malls were used in carrying on the partnership’s ac- tive trade or business, they are not pas- sive assets under section 6166(b)(9) and their value is not excluded from the value of C’s interest in the partnership for pur- poses of section 6166. C’s interest in the limited partnership qualifies as an interest in a closely held business for purposes of section 6166. (Because C owned at least 20 percent of the partnership, the conclu- sion would be the same even if C’s ac- tivities were instead performed by another employee, partner or agent of the partner- ship). (5) InSituation 5, MNO was engaged in an automobile dealership business. Thus, MNO was conducting an active trade or business at the time of D’s death. Conse- quently, D’s 100 percent stock interest in MNO qualifies as an interest in a closely held business. In addition, Real Property P was used exclusively in the business of MNO under a net lease from D. As in Sit- uation 3, because D owned a significant interest in MNO, whose activities with re- gard to Real Property P constituted active management, D’s interest in Real Property P also qualifies as an interest in a closely held business. EFFECT ON OTHER REVENUE RULINGS Rev. Rul. 75–365, 1975–2 C.B. 471, is revoked, and the portion of Rev. Rul. 75–367, 1975–2 C.B. 472, relating to the eight rental homes is revoked. DRAFTING INFORMATION The principal author of this revenue rul- ing is Tracey B. Leibowitz of the Office of the Associate Chief Counsel, Procedure and Administration (Administrative Provi- sions and Judicial Practice Division). For further information regarding this revenue ruling, contact Laura R. Urich at (202) 622–4940 (not a toll-free call). 2006–26 I.R.B.1174June 26, 2006 Part III. Administrative, Procedural, and Miscellaneous Deduction for Energy Efficient Commercial Buildings Notice 2006–52 SECTION 1. PURPOSE This notice sets forth interim guidance, pending the issuance of regulations, relat- ing to the deduction for energy efficient commercial buildings under § 179D of the Internal Revenue Code. Specifically, this notice sets forth a process that allows a tax- payer who owns, or is a lessee of, a com- mercial building and installs property as part of the commercial building’s interior lighting systems, heating, cooling, venti- lation, and hot water systems, or building envelope to obtain a certification that the property satisfies the energy efficiency re- quirements of § 179D(c)(1) and (d). This notice also provides for a public list of soft- ware programs that must be used in calcu- lating energy and power consumption for purposes of § 179D. The Internal Revenue Service and the Treasury Department ex- pect that the rules set forth in this notice will be incorporated in regulations. SECTION 2. BACKGROUND .01In General. Section1331ofthe Energy Policy Act of 2005, Pub. L. No. 109–58, 119 Stat. 594 (2005), enacted § 179D of the Code, which provides a deduction with respect to energy efficient commercial buildings. Section 179D(a) allows a deduction to a taxpayer for part or all of the cost of energy efficient com- mercial building property that the taxpayer places in service after December 31, 2005, and before January 1, 2008. (See section 2.02 of this notice.) Sections 179D(d)(1) and 179D(f) allow a deduction to a tax- payer for part or all of the cost of cer- tain partially qualifying commercial build- ing property that the taxpayer places in ser- vice after December 31, 2005, and before January 1, 2008. (See sections 2.03, 2.04, and 2.05 of this notice.) For purposes of this notice partially qualifying commercial building property is property that would be energy efficient commercial building property but for the failure to achieve the 50-percent reduction in energy and power costs required under section 2.02(1)(c) of this notice. .02Energy Efficient Commercial Build- ing Property. (1)In General. Energy efficient com- mercial building property is depreciable property that satisfies each of the follow- ing conditions: (a) The property is installed on or in any building that is located in the United States and is within the scope of Standard 90.1–2001. (See section 5.02 of this no- tice for the description of buildings within the scope of Standard 90.1–2001 and sec- tion 5.06 of this notice for the complete de- scription of Standard 90.1–2001.) (b) The property is installed as part of— (i) the interior lighting systems, (ii) the heating, cooling, ventilation, and hot water systems, or (iii) the building envelope. (c) It is certified that the interior light- ing systems, heating, cooling, ventilation, and hot water systems, and building en- velope that have been incorporated into the building, or that the taxpayer plans to incorporate into the building subse- quenttotheinstallationofsuchproperty, will reduce the total annual energy and power costs with respect to combined usage of the building’s heating, cooling, ventilation, hot water, and interior light- ing systems by 50 percent or more as compared to a Reference Building that meets the minimum requirements of Stan- dard 90.1–2001. The required 50-percent reduction must be accomplished solely through energy and power cost reductions for the heating, cooling, ventilation, hot water, and interior lighting systems. Re- ductions in any other energy uses, such as receptacles, process loads, refrigera- tion, cooking, and elevators, are not taken into account in determining whether the 50-percent reduction is achieved. (2)Maximum Amount of Deduction. (a)In General. The deduction for the cost of energy efficient commercial build- ing property installed on or in a building shall not exceed the excess (if any) of— (i) the product of $1.80 and the square footage of the building, over (ii) the aggregate amount of the § 179D deductions allowed with respect to the building for all prior taxable years. (b)Application to Multiple Taxpayers. If two or more taxpayers install energy ef- ficient commercial building property on or in the same building, the aggregate amount of the § 179D deductions allowed to all such taxpayers with respect to the building shall not exceed the amount determined under section 2.02(2)(a) of this notice. .03Partially Qualifying Property: En- ergy Efficient Lighting Property. (1)In General. Energy efficient light- ing property is partially qualifying prop- erty, within the meaning of section 2.01 of this notice, that is subject to either the permanent rule in section 2.03(1)(a) of this notice or the interim rule in section 2.03(1)(b) of this notice. (a)Permanent Rule. Partially qualify- ing property is subject to the permanent rule if it is installed as part of the interior lighting systems of a building and it is cer- tified that the interior lighting systems that have been incorporated into the building, or that the taxpayer plans to incorporate into the building subsequent to the in- stallation of such property, will reduce the total annual energy and power costs with respect to combined usage of the building’s heating, cooling, ventilation, hot water, and interior lighting systems by 16 2 /3percent or more as compared to a Reference Building that meets the mini- mum requirements of Standard 90.1–2001. The required 16 2 /3-percent reduction must be accomplished solely through energy and power cost reductions for the heat- ing, cooling, ventilation, hot water, and interior lighting systems. Reductions in any other energy uses, such as recepta- cles, process loads, refrigeration, cooking, and elevators, are not taken into account in determining whether the 16 2 /3-percent reduction is achieved. (b)Interim Rule. Partially qualifying property, within the meaning of section 2.01 of this notice, is subject to the interim rule if it is not subject to the permanent rule in section 2.03(1)(a) of this notice, if it is installed as part of the interior lighting sys- tems of a building before the date on which final regulations under section 179D are published in the Federal Register, and it is certified that the interior lighting systems that have been incorporated into the build- June 26, 200611752006–26 I.R.B. ing, or that the taxpayer plans to incorpo- rate into the building,— (i) Achieve a reduction in lighting power density of at least 25 percent (50 percent in the case of a warehouse) of the minimum requirements in Table 9.3.1.1 or Table 9.3.1.2 (not including additional interior lighting power allowances) of Standard 90.1–2001; (ii) Have controls and circuiting that comply fully with the mandatory and prescriptive requirements of Standard 90.1–2001; (iii) Include provision for bi-level switching in all occupancies except hotel and motel guest rooms, store rooms, re- strooms, and public lobbies; and (iv) Meet the minimum requirements for calculated lighting levels as set forth in the IESNA Lighting Handbook, Per- formance and Application, Ninth Edition, 2000. (2)Maximum Amount of Deduction. (a)Property subject to the permanent rule. (i)In General. If the energy efficient lighting property installed on or in a build- ing is subject to the permanent rule in sec- tion 2.03(1)(a) of this notice, the deduction for the cost of the property shall not exceed the excess (if any) of— (A) the product of $0.60 and the square footage of the building, over (B) the aggregate amount of the § 179D deductions allowed with respect to energy efficient lighting property installed on or in the building for all prior taxable years. (ii)Application to Multiple Taxpayers. If two or more taxpayers install energy ef- ficient lighting property on or in the same building and the property is subject to the permanent rule in section 2.03(1)(a) of this notice, the aggregate amount of the § 179D deductions allowed to all such taxpayers with respect to the building shall not ex- ceed the amount determined under section 2.03(2)(a)(i) of this notice. (b)Property subject to the interim rule. (i)In General. If the energy efficient lighting property installed on or in a build- ing is subject to the interim rule in section 2.03(1)(b) of this notice, the deduction for the cost of the property is equal to the ap- plicable percentage of the deduction that would be allowed if the property were sub- ject to the permanent rule. In addition, the deduction for the cost of the property shall not exceed the excess (if any) of— (A) the applicable percentage of the product of $0.60 and the square footage of the building, over (B) the aggregate amount of the § 179D deductions allowed with respect to energy efficient lighting property installed on or in the building for all prior taxable years. (ii)Applicable percentage.Ifthein- terior lighting systems of the building achieve a reduction in lighting power den- sity of at least 40 percent, the applicable percentage for the building is 100 percent. If the interior lighting systems of the build- ing achieve a reduction in lighting power density of less than 40 percent, the appli- cable percentage for the building is 100 percent reduced at a rate of 3 1 /3percentage points per percentage point by which 40 percent exceeds the percentage reduction in lighting power density. For example, if the interior lighting systems achieve a reduction in lighting power density of 32.5 percent, the applicable percentage is 75 percent (100 - (3 1 /3x (40 - 32.5))). (iii)Application to Multiple Taxpayers. If two or more taxpayers install energy ef- ficientlightingpropertyonorinthesame building and the property is subject to the interim rule in section 2.03(1)(b) of this notice, the aggregate amount of the § 179D deductions allowed to all such taxpayers with respect to the building shall not ex- ceed the amount determined under section 2.03(2)(b)(i) of this notice. .04Partially Qualifying Property: En- ergy Efficient Heating, Cooling, Ventila- tion, and Hot Water Property. (1)In General. Energy efficient heat- ing, cooling, ventilation, and hot water property is partially qualifying property, within the meaning of section 2.01 of this notice, that satisfies both of the following conditions: (a) The property is installed as part of the heating, cooling, ventilation, and hot water systems of a building; and (b) It is certified that the heating, cool- ing, ventilation, and hot water systems that have been incorporated into the building, or that the taxpayer plans to incorporate into the building subsequent to the in- stallation of such property, will reduce the total annual energy and power costs with respect to combined usage of the building’s heating, cooling, ventilation, hot water, and interior lighting systems by 16 2 /3percent or more as compared to a Reference Building that meets the mini- mum requirements of Standard 90.1–2001. The required 16 2 /3-percent reduction must be accomplished solely through energy and power cost reductions for the heat- ing, cooling, ventilation, and hot water systems. Reductions in any other energy uses, such as receptacles, process loads, refrigeration, cooking, and elevators, are not taken into account in determining whether the 16 2 /3-percent reduction is achieved. (2)MaximumAmountofDeduction. (a)In General. The deduction for the cost of energy efficient heating, cooling, ventilation, and hot water property in- stalled on or in a building shall not exceed the excess (if any) of— (i) the product of $0.60 and the square footage of the building, over (ii) the aggregate amount of the § 179D deductions allowed with respect to energy efficient heating, cooling, ventilation, and hot water property installed on or in the building for all prior taxable years. (b)Application to Multiple Taxpayers. If two or more taxpayers install energy ef- ficient heating, cooling, ventilation, and hot water property on or in the same build- ing, the aggregate amount of the § 179D deductions allowed to all such taxpayers with respect to the building shall not ex- ceed the amount determined under section 2.04(2)(a) of this notice. .05Partially Qualifying Property: En- ergy Efficient Building Envelope Property. (1)In General. Energy efficient build- ing envelope property is partially qualify- ing property, within the meaning of section 2.01 of this notice, that satisfies both of the following conditions: (a) The property is installed as part of the building envelope of a building; and (b) It is certified that the building en- velope that has been incorporated into the building, or that the taxpayer plans to incorporate into the building subse- quent to the installation of such property, will reduce the total annual energy and power costs with respect to combined usage of the building’s heating, cooling, ventilation, hot water, and interior lighting systems by 16 2 /3percent or more as com- pared to a Reference Building that meets the minimum requirements of Standard 90.1–2001. The required 16 2 /3-percent reduction must be accomplished solely through energy and power cost reductions for the heating, cooling, ventilation, hot 2006–26 I.R.B.1176June 26, 2006 water, and interior lighting systems. Re- ductions in any other energy uses, such as receptacles, process loads, refrigera- tion, cooking, and elevators, are not taken into account in determining whether the 16 2 /3-percent reduction is achieved. (2)Maximum Amount of Deduction. (a)In General. The deduction for the cost of energy efficient building envelope property installed on or in a building shall not exceed the excess (if any) of— (i) the product of $0.60 and the square footage of the building, over (ii) the aggregate amount of the § 179D deductions allowed with respect to energy efficient building envelope property in- stalled on or in the building for all prior taxable years. (b)Application to Multiple Taxpayers. If two or more taxpayers install energy ef- ficient building envelope property on or in the same building, the aggregate amount of the § 179D deductions allowed to all such taxpayers with respect to the building shall not exceed the amount determined under section 2.05(2)(a) of this notice. SECTION 3. METHOD OF COMPUTATION .01In General. The Performance Rating Method (PRM) must be used to compute the percentage reduction in the total annual energy and power costs with respect to combined usage of a building’s heating, cooling, ventilation, hot water, and interior lighting systems as com- pared to a Reference Building that meets the minimum requirements of Standard 90.1–2001. .02Performance Rating Method (PRM). For purposes of this notice, the PRM includes the following computa- tions: (1) Reference Building Energy and Power Costs equal the sum of the energy and power costs for the following compo- nents of the Reference Building: (a) Interior Lighting, (b) Heating, (c) Cooling, (d) Ventilation, and (e) Hot Water. (2) Proposed Building Energy and Power Costs equal the sum of the energy and power costs for the same components of the Proposed Building. (3) Percentage Reduction in Energy and Power Costs is determined by— (a) Subtracting Proposed Building En- ergy and Power Costs from Reference Building Energy and Power Costs; and (b) Expressing the difference as a per- centage of Reference Building Energy and Power Costs. .03Reference Building. For purposes of this notice, the Reference Building is a building that is located in the same cli- mate zone as the taxpayer’s building and is otherwise comparable to the taxpayer’s building except that its interior lighting systems, heating, cooling, ventilation, and hot water systems, and building enve- lope meet the minimum requirements of Standard 90.1–2001. The energy perfor- mance of the Reference Building shall be determined by following the methods for baseline building performance in the PRM in Appendix G of Standard 90.1–2004. In calculating baseline building performance, the Reference Building shall use the fol- lowing additional requirements from the 2005 California Title 24 Nonresidential Alternative Calculation Method (ACM) Approval Manual: (1) Number of occupants, occupant sensible and latent heat loads, receptacle loads, and hot water loads from ACM Tables N2–2 for whole building values and Table N2–3 for building area values appropriate for mixed use buildings; (2) Occupancy, HVAC, fans, infiltra- tion, hot water, lighting, and equipment schedules from ACM Tables N2–4 through N2–9; (3) Infiltration modeled following ACM Section 2.4.1.6; (4) Luminaire power for interior light- ing systems from the 2005 California Title 24 Nonresidential ACM Appendix NB or from manufacturers data. .04Proposed Building. (1)Energy Efficient Commercial Build- ing Property. In computing energy and power cost savings for purposes of sec- tion 2.02 (relating to energy efficient com- mercial building property), the Proposed Building is a building that contains the in- terior lighting systems, heating, cooling, ventilation, and hot water systems, and building envelope that have been incorpo- rated, or that the taxpayer plans to incorpo- rate, into the taxpayer’s building but that is otherwise identical tothe Reference Build- ing. (2)Energy Efficient Lighting Property. In computing energy and power cost sav- ings for purposes of section 2.03 (relat- ing to energy efficient lighting property), the Proposed Building is a building that contains the interior lighting systems that have been incorporated (or that the tax- payer plans to incorporate) into the tax- payer’s building but that is otherwise iden- tical to the Reference Building. (3)Energy Efficient Heating, Cooling, Ventilation, and Hot Water Property.In computing energy and power cost savings for purposes of section 2.04 (relating to energy efficient heating, cooling, ventila- tion, and hot water property), the Proposed Building is a building that contains the heating, cooling, ventilation, and hot wa- ter systems that have been incorporated, or that the taxpayer plans to incorporate, into the taxpayer’s building but that is other- wise identical to the Reference Building. (4)Energy Efficient Building Envelope Property. In computing energy and power cost savings for purposes of section 2.05 (relating to energy efficient building enve- lope property), the Proposed Building is a building that contains the building enve- lope that has been incorporated, or that the taxpayer plans to incorporate, into the tax- payer’s building but that is otherwise iden- tical to the Reference Building. SECTION 4. CERTIFICATION Before a taxpayer may claim the § 179D deduction with respect to property in- stalledonorinacommercialbuilding, the taxpayer must obtain a certification with respect to the property. The certi- fication must be provided by a qualified individual and satisfy the requirements of § 179D(c)(1). A taxpayer is not required to attach the certification to the return on which the deduction is taken. However, § 1.6001–1(a) of the Income Tax Regu- lations requires that taxpayers maintain such books and records as are sufficient to establish the entitlement to, and amount of, any deduction claimed by the taxpayer. Accordingly, a taxpayer claiming a deduc- tion under § 179D should retain the certifi- cation as part of the taxpayer’s records for purposes of § 1.6001–1(a) of the Income Tax Regulations. A certification will be treated as satisfying the requirements of § 179D(c)(1) if the certification contains all of the following: June 26, 200611772006–26 I.R.B. .01 The name, address, and telephone number of the qualified individual. .02 The address of the building to which the certification applies. .03 One of the following statements by the qualified individual: (1) Statement for energy efficient com- mercial building property: The interior lighting systems, heating, cooling, venti- lation and hot water systems, and building envelope that have been, or are planned to be, incorporated into the building will reduce the total annual energy and power costs with respect to combined usage of the building’s heating, cooling, ventila- tion, hot water, and interior lighting sys- tems by 50 percent or more as compared to a Reference Building that meets the mini- mum requirements of Standard 90.1–2001. (2) Statement for energy efficient light- ing property that satisfies the requirements of the permanent rule of section 2.03(1)(a) of this notice: The interior lighting sys- tems that have been, or are planned to be, incorporated into the building will reduce the total annual energy and power costs with respect to combined usage of the building’s heating, cooling, ventilation, hot water, and interior lighting systems by 16 2 /3percent or more as compared to a Reference Building that meets the mini- mum requirements of Standard 90.1–2001. (3) Statement for energy efficient light- ing property that satisfies the requirements of the interim rule of section 2.03(1)(b) of this notice: The interior lighting systems that have been, or are planned to be, in- corporated into the building satisfy the re- quirements of the interim rule of section 2.03(1)(b) of Notice 2006–52. (4) Statement for energy efficient heat- ing, cooling, ventilation, and hot water property: The heating, cooling, ventila- tion, and hot water systems that have been, or are planned to be incorporated into the building will reduce the total annual en- ergy and power costs with respect to com- bined usage of the building’s heating, cool- ing, ventilation, hot water, and interior lighting systems by 16 2 /3percent or more as compared to a Reference Building that meets the minimum requirements of Stan- dard 90.1–2001. (5) Statement for energy efficient build- ing envelope property: The building enve- lope that has been, or is planned to be, in- corporated into the building will reduce the total annual energy and power costs with respect to combined usage of the build- ing’s heating, cooling, ventilation, hot wa- ter, and interior lighting systems by 16 2 /3 percent or more as compared to a Refer- ence Building that meets the minimum re- quirements of Standard 90.1–2001. .04 A statement by the qualified indi- vidual that the amount of such reduction has been determined under the rules of No- tice 2006–52. .05 A statement by the qualified indi- vidual that field inspections of the building performed by a qualified individual after the property has been placed in service have confirmed that the building has met, or will meet, the energy-saving targets contained in the design plans and spec- ifications, and that the field inspections were performed in accordance with any inspection and testing procedures that (1) have been prescribed by the National Re- newable Energy Laboratory (NREL) as Energy Savings Modeling and Inspection Guidelines for Commercial Building Fed- eral Tax Deductions and (2) are in effect at the time the certification is given. .06 A statement that the building owner has received an explanation of the energy efficiency features of the building and its projected annual energy costs; .07 A statement that qualified computer software was used to calculate energy and power consumption and costs and identifi- cation of the qualified computer software used (see section 6 of this notice). .08 A list identifying the components of the interior lighting systems, heating, cool- ing, ventilation, and hot water systems, and building envelope installed on or in the building, the energy efficiency features of the building, and its projected annual en- ergy costs. .09 A declaration, applicable to the certification and any accompanying docu- ments, signed by the qualified individual, in the following form: “Under penalties of perjury, I declare that I have examined this certification, including accompanying documents, and to the best of my knowledge and belief, the facts presented in support of this certification are true, correct, and complete.” SECTION 5. DEFINITIONS The following definitions apply for pur- poses of this notice: .01Building Square Footage.Thesum of the floor areas of the conditioned spaces within the building, including basements, mezzanine, and intermediate-floored tiers, and penthouses with headroom height of 7.5 feet or greater. Building square footage is measured from the exterior faces of ex- terior walls or from the centerline of walls separating buildings, but excludes cov- ered walkways, open roofed-over areas, porches and similar spaces, pipe trenches, exterior terraces or steps, chimneys, roof overhangs, and similar features. .02Building within the Scope of Stan- dard 90.1–2001.Astructurethat— (1) Is wholly or partially enclosed within exterior walls, or within exterior and party walls, and a roof, affording shel- ter to persons, animals, or property; and (2) Is not a single-family house, a multi- family structure of three stories or fewer above grade, a manufactured house (mo- bile home), or a manufactured house (mod- ular). .03Conditioned Space. Any enclosed space within the building qualifying as cooled space, heated space, or indirectly conditioned space defined as follows: (1)Cooled Space. Anenclosedspace that is cooled by a cooling system whose sensible output capacity exceeds 5 Btu per hour per square foot of floor area. (2)Heated Space. Anenclosedspace that is heated by a heating system whose output capacity relative to the floor area exceeds 5 Btu per hour per square foot of floor area. (3)Indirectly Conditioned Space.An enclosed space (other than a heated space or a cooled space) that is heated or cooled indirectly by being connected to adjacent space(s) and that satisfies either of the fol- lowing conditions: (a) The space’s surface area that is ad- jacent to heated or cooled space multiplied by the weighted average U-factor of such adjacent surface area exceeds the space’s surface area adjoining the outdoors, un- conditioned spaces, and semi-heated spaces (e.g., corridors) multiplied by the weighted average U-factor of such adjoin- ing surface area; or (b) The air from heated or cooled spaces is intentionally transferred (natu- rally or mechanically) into the space at a rate exceeding 3 air changes per hour (ACH). 2006–26 I.R.B.1178June 26, 2006 .04Qualified Computer Software.Soft- ware that meets the following require- ments: (1) The software is included (at the time the certification is given) on the Depart- ment of Energy’s published list of quali- fiedsoftwareasdescribedinsection6of this notice. (2) The software provides any infor- mation that regulations or other guidance require the taxpayer to file in connection with energy efficiency of property and the deduction allowed under § 179D. (3) The software provides information that allows the user to document the energy efficiency featuresof the building and its projected annual energy costs. .05Qualified Individual. An individual that— (1) Is not related (within the meaning of §45(e)(4)) to the taxpayer claiming the deduction under § 179D; (2) Is an engineer or contractor that is properly licensed as aprofessional engi- neer or contractor in the jurisdiction in which the building is located; and (3) Has represented in writing to the taxpayer that he or she has the requisite qualifications to provide the certification required under section 4 of this notice (in the case of an individual providing the cer- tification) or to perform the inspection and testing described in section 4.05 of this no- tice (in the case of an individual perform- ing the inspection). .06Standard90.1–2001. ANSI/ASHRAE/IESNAStandard 90.1–2001, Energy Standard for Buildings Except Low-Rise Residential Buildings, developed for the American National Standards Institute by the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America (as in effect on April 2, 2003, including addenda 90.1a–2003, 90.1b–2002, 90.1c–2002, 90.1d–2002, and 90.1k–2002 as in effect on that date). SECTION 6. LIST OF APPROVED SOFTWARE PROGRAMS .01In General. The Department of Energy will create and maintain a pub- lic list of software that may be used to calculate energy and power consump- tion and costs for purposes of provid- ing a certification under section 4 of this notice. This public list will ap- pear athttp://www.eere.energy.gov/build- ings/info/tax_credit_2006.html.Software will be included on the list if the software developer submits the following informa- tion to the Department of Energy: (1) The name, address, and (if applica- ble) web site of the software developer; (2) The name, email address, and tele- phone number of the person to contact for further information regarding the soft- ware; (3) The name, version, or other identi- fier of the software as it will appear on the list; (4) All test results, input files, output files, weather data, modeler reports, and theexecutableversionofthesoftwarewith which the tests were conducted; and (5) A declaration by the developer of the software, made under penalties of per- jury, that— (a) The software has been tested ac- cording to the American National Stan- dards Institute/American Society of Heat- ing, Refrigerating and Air-Conditioning Engineers (ANSI/ASHRAE) Standard 140–2004 Standard Method of Test for the Evaluation of Building Energy Analysis Computer Programs; (b) The software can model explicitly— (i) 8,760 hours per year; (ii) Calculation methodologies for the building components being modeled; (iii) Hourly variations in occupancy, lighting power, miscellaneous equipment power, thermostat setpoints, and HVAC system operation, defined separately for each day of the week and holidays; (iv) Thermal mass effects; (v) Ten or more thermal zones; (vi) Part-load performance curves for mechanical equipment; (vii) Capacity and efficiency correction curves for mechanicalheating and cooling equipment; and (viii) Air-side and water-side econo- mizers with integrated control; and (c) The software can— (i) Either directly determine energy and power costs or produce hourly reports of energy use by energy source suitable for determining energy and power costs sepa- rately; and (ii) Design load calculations to deter- mine required HVAC equipment capacities and air and water flow rates. .02Addresses. Submissions under this section must be addressed as follows: Commercial Software List Department of Energy Office of Building Technologies, EE–2J 1000 Independence Ave., SW Washington, DC 20585–0121 .03Original and Updated Lists.Soft- ware will be included on the original list if the software developer’s submission is re- ceived before July 1, 2006. The list will be updated as necessary to reflect submis- sions received after June 30, 2006. .04Removal from Published List.The Department of Energy may, upon exami- nation, determine thatsoftware is not suf- ficiently accurate to justify its use in calcu- lating energy and power consumption and costs for purposes of providing a certifica- tion under section 4 of this notice and re- move the software from the published list. The Department of Energy may undertake such an examination on its own initiative or in response to a public request supported by appropriate analysis of the software’s deficiencies. .05Effect of Removal from Published List. Software may not be used to calcu- late energy and power consumption and costs for purposes of providing a certifi- cation with respect to property placed in serviceafterthedateonwhichthesoft- ware is removed from the published list. The removal will not affect the validity of any certification with respect to property placed in service on or before the date on which the software is removed from the published list. .06 Public Availability of Information. The Department of Energy may make all information provided under paragraph .01 of this section available for public review. SECTION 7. PAPERWORK REDUCTION ACT The collections of information con- tained in this notice have been reviewed and approved by the Office of Manage- ment and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–2004. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the June 26, 200611792006–26 I.R.B. collection of information displays a valid OMB control number. The collections of information in this notice are in sections 4 and 6. This in- formation is required to be collected and retained in order to ensure that energy efficient commercial building property meets the requirements for the deduction under § 179D. This information will be used to determine whether commercial building property for which certifications are provided is property that qualifies for the deduction. The collection of information is re- quired to obtain a benefit. The likely respondents are two groups: qualified individuals providing a certifica- tion under § 179D (section 4) and soft- ware developers seeking to have software included on the public list created by the Department of Energy (section 6). For qualified individuals providing a certification under § 179D, the likely re- spondents are individuals. The likely num- ber of certifications is 20,000. The esti- mated burden per certification ranges from 15 to 30 minutes with an estimated average burden of 22.5 minutes. The estimated to- tal annual reporting burden is 7,500 hours. For software developers seeking to have software included on the public list created by the Department of Energy, the likely respondents are individuals, corpo- rations and partnerships. The estimated total annual reporting burden is 75 hours. The estimated annual burden per respon- dent varies from 1 to 2 hours, depending on individual circumstances, with an es- timated average burden of 1 1 /2hours to complete the submission required to have the software added to the public list. The estimated number of respondents is 50. The estimated frequency of responses is once. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. SECTION 8. DRAFTING INFORMATION The principal author of this notice is Jennifer C. Bernardini of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further in- formation regarding this notice, contact Jennifer C. Bernardini at (202) 622–3120 (not a toll-free call). Clarification of Notice 2006–26 Notice 2006–53 On February 22, 2006, the Service is- sued Notice 2006–26, 2006–11 I.R.B. 622. This notice clarifies that section 4.04 of Notice 2006–26 should read as follows: .04 Specifically and Primarily De- signed.A component is not specifically and primarily designed to reduce heat loss or gain of a dwelling unit if it provides structural support or a finished surface, as in the case of drywall or siding. In addition, a component is not specifically and primarily designed to reduce heat loss or gain of a dwelling unit if its principal purpose is to serve any function unrelated to the reduction of heat loss or gain. For purposes of the preceding sentence, the principal purpose of a component serves functions unrelated to the reduction of heat loss or gain if— (1) Production costs attributable to fea- tures other than those that reduce heat loss or gain exceed production costs attribut- able to features thatreduce heat loss or gain; or (2) The facts and circumstances other- wise establish that the component’s prin- cipal purpose is to serve a function other than heat loss or gain. Taxpayers who purchased siding on or before June 26, 2006 may rely on a man- ufacturer’s certification that the siding is an Eligible Building Envelope Component for purposes of the section 25C credit. A manufacturer will not be subject to penal- ties under § 7206 or § 6701 on account of a certification thatsidingisanEligi- ble Building Envelope Component under section 4.02 of Notice 2006–26 unless the manufacturer continues to provide the cer- tification to purchasers of the siding after June 26, 2006. DRAFTING INFORMATION The principal author of this notice is Jennifer C. Bernardini of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further in- formation regarding this notice, contact Jennifer C. Bernardini at (202) 622–3120 (not a toll-free call). Credit for New Qualified Alternative Motor Vehicles Notice 2006–54 SECTION 1. PURPOSE This notice sets forth interim guid- ance, pending the issuance of regulations, relating to the new qualified alternative fuel motor vehicle (QAFMV) credit under § 30B(a)(4) and (e) of the Internal Rev- enue Code (including the reduced credit under § 30B(e)(5) for mixed-fuel vehi- cles). Specifically, this notice provides procedures that a vehicle manufacturer (or, in the case of a foreign vehicle manu- facturer, its domestic distributor) may use if it chooses to certify: (1) that a vehicle of a particular make, model, and year meets certain require- ments that must be satisfied to claim the new QAFMV credit under § 30B(a)(4) and (e); and (2) the amount of the credit allowable with respect to that vehicle. This notice also provides guidance to taxpayers who purchase vehicles regard- ing the conditions under which they may rely on the vehicle manufacturer’s (or, in the case of a foreign vehicle manufacturer, its domestic distributor’s) certification in determining whether a QAFMV credit is allowable with respect to the vehicle, and the amount of the credit. In addition, the notice provides guidance with respect to certain issues relating to qualification for and computation of the credit. The Internal Revenue Service and the Treasury Depart- ment expect that the regulations will incor- porate the rules set forth in this notice. SECTION 2. BACKGROUND Section 30B(a)(4) provides for a credit determined under § 30B(e) for certain new QAFMVs. The credit is equal to the appli- cable percentage of the incremental cost of the new QAFMV. The minimum applica- ble percentage for QAFMVs is 50 percent, but the applicable percentage is 80 percent 2006–26 I.R.B.1180June 26, 2006 for qualified QAFMVs that meet the emis- sions standards of § 30B(e)(2)(B)(i) or (ii) (see section 7.03(2) of this notice). Certain vehicles other than QAFMVs (i.e., mixed-fuel vehicles described in sec- tion 5.01 and 5.02 of this notice) may qual- ify for a reduced credit under § 30B(e)(5). Mixed-fuel vehicles are eligible for a re- duced credit equal to either 70 percent or 90 percent of the applicable credit allowable under § 30B(a)(4). For this purpose, the applicable credit allowable under § 30B(a)(4) is the 80-percent credit for mixed-fuel vehicles that satisfy the emissions standards of § 30B(e)(2)(B)(i) or (ii) and the 50-percent credit for other mixed-fuel vehicles. The reduced credit for mixed-fuel vehicles applies only to vehicles that have a gross vehicle weight rating of more than 14,000 pounds and that can operate efficiently on a combination of alternative fuel and a petroleum-based fuel. SECTION 3. SCOPE OF NOTICE This notice provides certification pro- cedures for the QAFMV credit under § 30B(a)(4) and (e). In addition, the no- tice provides guidance with respect to certain issues relating to qualification for and computation of the QAFMV credit. This notice does not address a number of other issues that are common to all mo- tor vehicles that qualify for credits under § 30B. These include: (1) the rules under which lessors may claim the credits allow- able under § 30B; (2) the rule preventing thecreditsfrombeingusedtoreduceal- ternative minimum tax liability; and (3) recapture of the credits. The Service and Treasury Department expect to issue sep- arate guidance relating to these issues. SECTION 4. MEANING OF TERMS The following definitions apply for pur- poses of this notice: .01In General. Terms used in this no- tice, but not specifically defined in this sec- tion, have the same meaning as when used in§30B. .02Incremental Cost. The incremen- tal cost of a new QAFMV or a mixed-fuel vehicle is equal to the amount of the ex- cess of the manufacturer’s suggested re- tail price for the vehicle over the manufac- turer’s suggested retail price for a gasoline or diesel fuel motor vehicle of the same model. .03Manufacturer’s Suggested Retail Price. If the manufacturer of a QAFMV or a mixed-fuel vehicle is required under 15 U.S.C. § 1232 to provide a manufac- turer’s suggested retail price for the ve- hicle, then the manufacturer’s suggested retail price for the vehicle is the price pro- vided in accordance with 15 U.S.C. § 1232 for that vehicle. Similarly, if the manu- facturer of a QAFMV or a mixed-fuel vehicle is required under 15 U.S.C. § 1232 to provide a manufacturer’s suggested retail price for a gasoline or diesel fuel vehicle of the same model, then the man- ufacturer’s suggested retail price for the gasoline or diesel fuel vehicle is the price provided in accordance with 15 U.S.C. § 1232 for that vehicle. In all other cases, the manufacturer’s suggested retail price is the amount the manufacturer (or in the case of a foreign vehicle manufacturer, its domestic distributor) specifies as the man- ufacturer’s suggested retail price under section 7.03(1)(g) and (h) of this notice. .04Mixed Fuel. A mixed fuel is a com- bination of an alternative fuel and a petro- leum-based fuel. SECTION 5. MIXED-FUEL VEHICLES .0190/10 Mixed-Fuel Vehicles.A mixed-fuel vehicle qualifies for a credit equal to 90 percent of the applicable credit allowable under § 30B(a)(4) only if the vehicle is not able to perform efficiently in normal operation unless its fuel contains at least 90 percent alternative fuel and not more than 10 percent petroleum-based fuel. .0275/25 Mixed-Fuel Vehicles.A mixed-fuel vehicle qualifies for a credit equal to 70 percent of the applicable credit allowable under § 30B(a)(4) only if the vehicle is not able to perform efficiently in normal operation unless its fuel contains at least 75 percent alternative fuel and not more than 25 percent petroleum-based fuel. .03Mixed-Fuel Percentages. The per- centages of alternative fuel and petroleum- based fuel contained in a mixed fuel are determined on the basis of the Btu con- tent of the alternative fuel and the petro- leum-based fuel. If the alternative fuel contained in the mixed fuel is a liquid at least 85 percent of the volume of which consists of methanol, the Btu content of any petroleum-based fuel included in such liquid is treated, for purposes of determin- ing the percentages, as part of the Btu con- tent of the alternative fuel contained in the mixed fuel and not as part of the Btu con- tent of the petroleum-based fuel contained in the mixed fuel. SECTION 6. CONVERTED VEHICLES .01In General. The definitions and rules in this section apply solely with re- spect to converted vehicles. For this pur- pose, a converted vehicle is an alternative fuel motor vehicle or a mixed-fuel vehi- cle that was converted from a new or used gasoline or diesel fuel motor vehicle. .02Made by a Manufacturer. A con- verted vehicle is made by a manufacturer only if a person is required under title II of the Clean Air Act (or as a condition of re- ceiving an exemption from the tampering prohibitions in § 203 of the Clean Air Act) to obtain a certificate of conformity cov- ering the converted vehicle or the engine used in the converted vehicle. .03Manufacturer. (1) Except as pro- vided in section 6.03(2) of this notice, the manufacturer of a converted vehicle is the person required under title II of the Clean Air Act (or as a condition of receiving an exemption from the tampering prohibi- tions in § 203 of the Clean Air Act) to ob- tain the certificate of conformity covering the converted vehicle or, if no person is so required, the person required under title II of the Clean Air Act (or as a condition of receiving an exemption from the tamper- ing prohibitions in § 203 of the Clean Air Act) to obtain a certificate of conformity covering the engine used in the converted vehicle. (2) If an importer of a converted vehi- cle would be treated as the manufacturer of the vehicle under section 6.03(1) of this notice, the manufacturer is the person that manufactured or assembled the vehicle. If an importer of an engine would be treated as the manufacturer of the converted vehi- cle in which it is used under section 6.03(1) of this notice, the manufacturer of the con- verted vehicle is the person that manufac- tured or assembled the engine. .04Original Use. The original use of the alternative fuel motor vehicle or mixed-fuel vehicle commences with the June 26, 200611812006–26 I.R.B. first person to place the vehicle in service after the conversion. SECTION 7. MANUFACTURER’S CERTIFICATION .01When Certification Permitted.A vehicle manufacturer (or, in the case of a foreign vehicle manufacturer, its domes- tic distributor) may certify to purchasers that a vehicle of a particular make, model, and year meets all requirements (other than thoselistedinsection7.02ofthisnotice) that must be satisfied to claim the new QAFMV credit, and the amount of the credit allowable under § 30B(a)(4) and (e) with respect to that vehicle, if the follow- ing requirements are met: (1) The manufacturer (or, in the case of a foreign vehicle manufacturer, its domes- tic distributor) has submitted to the Ser- vice, in accordance with section 8 of this notice, a certification with respect to the vehicle and the certification satisfies the requirements of section 7.03 of this notice; and (2) The manufacturer (or, in the case of a foreign vehicle manufacturer, its domes- tic distributor) hasreceived an acknowl- edgment of the certification from the Ser- vice. .02Purchaser’s Reliance. Except as provided in section 7.05 of this notice, a purchaserofamotorvehiclemayrelyon the manufacturer’s (or, in the case of a foreign vehicle manufacturer, its domestic distributor’s) certification concerning the vehicle and the amount of the credit allow- able with respect to the vehicle (including in cases in which the certification is re- ceived after the purchase of the vehicle). The purchaser may claim a credit in the certified amount with respect to the vehi- cle if the following requirements are satis- fied: (1) The vehicle is placed in service by the taxpayer after December 31, 2005, and is purchased on or before December 31, 2010; (2) The original use of the vehicle com- mences with the taxpayer; (3) The vehicle is acquired for use or lease by the taxpayer, and not for resale; and (4) The vehicle is used predominantly in the United States. .03Content of Certification. The cer- tification must contain the information re- quired in section 7.03(1) of this notice and any applicable additional information re- quired in section 7.03(2), section 7.03(3), or section 7.03(4) of this notice. (1)All Vehicles. For all vehicles, the certification must contain— (a) The name, address, and taxpayer identification number of the certifying en- tity; (b) The make, model, year, and any other appropriate identifiers of the motor vehicle; (c) A statement that the vehicle, as con- figured to operate only on an alternative fuel or a mixed fuel, is made by a manu- facturer; (d) The type of credit for which the ve- hicle qualifies (i.e., either the credit for alternative fuel motor vehicles or the re- duced credit for mixed-fuel vehicles); (e) The amount of the credit for such vehicle (showing computations); (f) The gross vehicle weight rating of the vehicle; (g) The manufacturer’s suggested retail price for the vehicle; (h) The manufacturer’s suggested retail price for a gasoline or diesel fuel motor vehicle of the same model; (i) The alternative fuel used by the ve- hicle; (j) A statement that the vehicle com- plies with the applicable provisions of the Clean Air Act; (k) A statement that the vehicle com- plies with the applicable air quality pro- visions of state law of each state that has adopted such provisions under a waiver under § 209(b) of the Clean Air Act or a list identifying each such state that has adopted applicable air quality provisions with which the vehicle does not comply; (l) A statement that the vehicle com- plies with the motor vehicle safety pro- visions of 49 U.S.C. §§ 30101 through 30169; and (m) A declaration, applicable to the certification and any accompanying doc- uments, signed by a person currently authorized to bind the manufacturer (or, in the case of a foreign manufacturer, its domestic distributor) in such matters, in the following form: “Under penalties of perjury, I declare that I have examined this certification, in- cluding accompanying documents, and to the best of my knowledge and belief, the facts presented in support of this certifica- tion are true, correct, and complete.” (2)80 Percent Credit. If the manufac- turer (or, in the case of a foreign manufac- turer, its domestic distributor) is certifying that the vehicle is eligible for the 80-per- cent credit (or is a mixed-fuel vehicle for which the applicable credit allowable un- der § 30B(a)(4) is the 80-percent credit), the certification must also contain one of the following: (a) a copy of the vehicle’s certificate of conformity under the Clean Air Act and evidence that the vehicle meets or ex- ceeds the most stringent applicable stan- dard (other than a zero emission standard) available for certification under the Clean Air Act— (i) as of the date of the certification in the case of a vehicle with a gross vehi- cle weight rating of not more than 14,000 pounds; and (ii) as of August 8, 2005, in the case of a vehicle with a gross vehicle weight rating of more than 14,000 pounds; or (b) a copy of an order certifying the ve- hicle as meeting the same requirements as vehicles that may be sold or leased in Cal- ifornia and evidence that the vehicle meets or exceeds the most stringent applicable standard (other than a zero emission stan- dard) available for certification under Cal- ifornia state laws enacted in accordance with a waiver granted under § 209(b) of the Clean Air Act— (i) as of the date of the certification in the case of a vehicle with a gross vehi- cle weight rating of not more than 14,000 pounds; and (ii) as of August 8, 2005, in the case of a vehicle with a gross vehicle weight rating of more than 14,000 pounds; (3)Alternative Fuel Motor Vehicles.A certification relating to an alternative fuel motor vehicle must also contain a state- ment that the vehicle is only capable of op- erating on the identified alternative fuel. (4)Mixed-Fuel Motor Vehicles. A cer- tification relating to a mixed-fuel vehicle must also contain— (a) a statement that the vehicle is able to perform efficiently in normal operation on a mixed fuel; (b) a statement identifying the alterna- tive fuel contained in the mixed fuel; (c) a statement specifying either— (i) that the vehicle is not able to perform efficiently in normal operation unless its 2006–26 I.R.B.1182June 26, 2006 fuel contains at least 90 percent alternative fuel and not more than 10 percent petro- leum-based fuel; or (ii) that the vehicle is not able to per- form efficiently in normal operation unless its fuel contains at least 75 percent alterna- tive fuel and not more than 25 percent pe- troleum-based fuel; and (d) one of the following: (i) a copy of the certificate of confor- mity under the Clean Air Act; or (ii) a copy of an order certifying that the vehicle meets the same requirements as ve- hicles that may be sold or leased in Califor- nia, and evidence that the vehicle meets or exceeds the applicable low emission vehi- cle standard under 40 C.F.R § 88.105–94, for that make and model year. .04Acknowledgment. The Service will review the original signed certification and issue an acknowledgment letter to the vehicle manufacturer (or, in the case of a foreign vehicle manufacturer, its domes- tic distributor) within 30 days of receipt of the request for certification. This ac- knowledgment letter will state whether purchasers may rely on the certification. .05Effect of Erroneous Certification. The acknowledgment that the Service pro- vides for a certification is not a determina- tion that a vehicle qualifies for the credit, or that the amount of the credit is correct. The Service may, upon examination (and after any appropriate consultation with De- partment of Transportation or the Envi- ronmental Protection Agency), determine that the vehicle is not a new QAFMV or a mixed-fuel vehicle or that the amount of the credit determined by the manufacturer (or, in the case of a foreign vehicle manu- facturer, its domestic distributor) to be al- lowable with respect to the vehicle is in- correct. In either event, the manufacturer’s (or, in the case of a foreign vehicle manu- facturer, its domestic distributor’s) right to provide a certification to future purchasers will be withdrawn, and purchasers who ac- quire vehicles after the date on which the Service publishes an announcement of the withdrawal may not rely on the certifica- tion. Purchasers may continue to rely on the certification for vehicles they acquired before the date on which the announce- ment of the withdrawal is published (in- cluding in cases in which the vehicle is not placed in service and the credit is not claimed until after that date), and the Ser- vice will not attempt to collect any un- derstatement of tax liability attributable to such reliance. Manufacturers (or, in the case of foreign manufacturers, their do- mestic distributors)are reminded that an erroneous certification may result in the imposition of penalties— (a) under § 7206 for fraud and making false statements; and (b) under § 6701 for aiding and abetting an understatement of tax liability in the amount of $1,000 ($10,000 in the case of understatements by corporations) per re- turn on which a credit is claimed in re- liance on the certification. SECTION 8. TIME AND ADDRESS FOR FILING CERTIFICATION .01Time for Filing. In order for certifi- cations under section 7 of this notice to be effective for new QAFMVs or mixed-fuel vehicles placed in service during a particu- lar calendar year, the certification must be received by the Service not later than De- cember 31 st of that calendar year. .02Address for Filing. Certifications under section 7 of this notice must be sent to: Internal Revenue Service, Industry Director, Large and Mid-Size Business, Heavy Manufacturing and Transportation, MetroParkOfficeComplex-LMSB, 111 Wood Avenue, South, Iselin, New Jersey 08830. SECTION 9. PAPERWORK REDUCTION ACT The collection of information contained in this notice has been reviewed and ap- proved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–1993. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. The collections of information in this notice are in section 7. This information is required to be collected and retained in order to ensure that vehicles meet the re- quirements for thenew QAFMV credit un- der § 30B(a)(4) and (e). This information will be used to determine whether the ve- hicle for which the credit is claimed by a taxpayer is property that qualifies for the credit. The collection of information is requiredtoobtainabenefit. Thelikely respondents are corporations and partner- ships. The estimated total annual reporting burden is 600 hours. The estimated annual burden per re- spondent varies from 16 hours to 25 hours, depending on individual circumstances, with an estimated average burden of 20 hours to complete the certification re- quired under this notice. The estimated number of respondents is 30. The estimated annual frequency of re- sponses is on occasion. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. § 6103. SECTION 10. DRAFTING INFORMATION The principal author of this notice is Nicole R. Cimino of the Office of Associate Chief Counsel (Passthroughs and Special Industries). For further in- formation regarding this notice, contact Ms. Cimino at (202) 622–3120 (not a toll-free call). June 26, 200611832006–26 I.R.B. Part IV. Items of General Interest Notice of Proposed Rulemaking by Cross-Reference to Temporary Regulations Guidance Necessary to Facilitate Business Electronic Filing and Burden Reduction REG–134317–05 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking by cross-reference to temporary regula- tions. SUMMARY: In this issue of the Bulletin, the IRS is issuing temporary regulations (T.D. 9264) that simplify, clarify, or elimi- nate reporting burdens. Those regulations also eliminate regulatory impediments to the electronic filing of certain statements that taxpayers are required to include on or with their Federal income tax returns. The text of those regulations also serves as the text of these proposed regulations. DATES: Written or electronic comments, and a request for a public hearing, must be received by August 28, 2006. ADDRESSES: Send submissions to: CC:PA:LPD:PR(REG–134317–05), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG–134317–05), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Wash- ington, DC, or sent electronically, via the IRS internet site atwww.irs.gov/regsor via the Federal eRulemaking Portal at www.regulations.gov(indicate IRS and REG–134317–05). FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Grid Glyer, (202) 622–7930, concerning submissions of comments, Kelly Banks (202) 622–7180 (not toll-free numbers). SUPPLEMENTARY INFORMATION: Paperwork Reduction Act The collection of information contained in this notice of proposed rulemaking has been submitted to the Office of Manage- ment and Budget for review in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collection of information should be sent to theOffice of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, D.C. 20503, with copies to theInternal Rev- enue Service, Attn: IRS Reports Clear- ance Officer, SE:W:CAR:MP:T:T:SP, Washington, D.C. 20224. Comments on the collection of information should be received by August 28, 2006. Comments are specifically requested concerning: Whether the proposed collection of in- formation is necessary for the proper per- formance of the functions of theInternal Revenue Service, including whether the information will have practical utility; The accuracy of the estimated burden associated with the proposed collection of information (see below); How the quality, utility and clarity of the information to be collected may be en- hanced; How the burden of complying with the proposed collection of information may be minimized, including through the appli- cation of automated collection techniques or other forms of information technology; and Estimates of capital or start-up costs and costs of operation, maintenance and purchase of service to provide information. The collection of information in these proposed regulations is in each of the cor- responding temporary regulations. The proposed regulations simplify, clarify, or eliminate reporting burdens. These regulations also eliminate regula- tory impediments to the electronic filing of certain statements that taxpayers are re- quired to include on or with their Federal income tax returns. The collection of information is manda- tory. The likely respondents are large cor- porations, many of which will be members of a consolidated group and/or component members of a controlled group. Estimated total annual reporting bur- den: 262,500 hours. Estimated average annual burden hours per respondent: 0.75 hours. Estimated number of respondents: 350,000. Estimated frequency of responses: an- nually. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Of- fice of Management and Budget. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. Background and Explanation of Provisions Temporary Regulations in this issue of the Bulletin amend 26 CFR Part 1 to add §§1.302–2T, 1.302–4T, 1.331–1T, 1.332–6T,1.338–10T,1.351–3T, 1.355–5T, 1.368–3T, 1.381(b)–1T, 1.382–8T, 1.382–11T, 1.1081–11T, 1.1221–2T, 1.1502–13T, 1.1502–31T, 1.1502–32T, 1.1502–33T, 1.1502–35T, 1.1502–76T, 1.1502–95T, 1.1563–1T, 1.1563–3T, and amend Part 602 to add §1.6012–2T. The text of those temporary regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the amendments. Special Analysis It has been determined that this no- tice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to the following proposed regulations: §§1.302–2, 1.302–4, 1.331–1, 1.332–6, 1.351–3, 1.355–5, 1.368–3, 1.381(b)–1, 1.1081–11, 1.1563–1, 1.1563–3, and 2006–26 I.R.B.1184June 26, 2006 1.6012–2. With respect to the collec- tions of information in such regula- tions, and with respect to the follow- ing proposed regulations, §§1.338–10, 1.382–8, 1.382–11, 1.1221–2, 1.1502–13, 1.1502–31, 1.1502–32, 1.1502–33, 1.1502–35, 1.1502–76 and 1.1502–95, it is hereby certified that these provisions will not have a significant economic im- pact on a substantial number of small entities. This certification is based on the fact that these regulations primarily affect large corporations (which are members of either controlled or consolidated groups) and in the case of all corporations will sub- stantially reduce or eliminate the existing reporting burden. Therefore, a regulatory flexibility analysis is not required. Pur- suant to section 7805(f) of the Internal Revenue Code, these proposed regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Ad- ministration for comment on their impact on small business. Comments and Requests for a Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any written comments (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. All comments will be available for public inspection and copy- ing. A public hearing may be scheduled ifrequestedinwritingbyanypersonthat timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in theFederal Register. Drafting Information The principal author of these regula- tions is Grid Glyer of the Office of As- sociate Chief Counsel(Corporate). Other personnel from the Treasury Department and the IRS participated in their develop- ment. ***** Proposed Amendments to the Regulations Accordingly, 26 CFR part 1 is proposed to be amended as follows: PART 1—INCOME TAXES Paragraph 1. The authority citation for part 1 continues to read, in part, as follows: Authority: 26 U.S.C. 7805 * * * Par. 2. Section 1.302–2 is amended by: 1. Redesignating paragraph (b) as para- graph (b)(1). 2. Revising newly designated para- graph (b)(1). 3. Adding paragraphs (b)(2) and (d). The additions and revisions read as fol- lows: §1.302–2 Redemptions not taxable as dividends. [The text of the proposed amendment to §1.302–2 is the same as the text for §1.302–2T published elsewhere in this is- sue of the Bulletin]. Par. 3. Section 1.302–4 is amended by revising paragraph (a) and adding para- graph (h) to read as follows: §1.302–4 Termination of shareholder’s interest. [The text of the proposed amendment to §1.302–4 is the same as the text for §1.302–4T published elsewhere in this is- sue of the Bulletin]. Par. 4. Section 1.331–1 is amended by revising paragraph (d) and adding para- graph (f) to read as follows: §1.331–1 Corporate liquidations. [The text of the proposed amendment to §1.331–1 is the same as the text for §1.331–1T published elsewhere in this is- sue of the Bulletin]. Par. 5. Section1.332–6addedtoread as follows: §1.332–6 Records to be kept and information to be filed with return. [The text of the proposed §1.332–6 is the same as the text for §1.332–6T pub- lished elsewhere in this issue of the Bul- letin]. Par. 6. Section 1.338–10 is amended by revising paragraph (a)(4)(iii) and adding paragraph (c) to read as follows: §1.338–10 Filing of returns. [The text of the proposed amendment to §1.338–10 is the same as the text for §1.338–10T published elsewhere in this is- sue of the Bulletin]. Par. 7. Section 1.351–3 is added to read as follows: §1.351–3 Records to be kept and information to be filed. [The text of the proposed §1.351–3 is the same as the text for §1.351–3T pub- lished elsewhere in this issue of the Bul- letin]. Par. 8. Section 1.355–5 is added to read as follows: §1.355–5 Records to be kept and information to be filed. [The text of the proposed §1.355–5 is the same as the text for §1.355–5T pub- lished elsewhere in this issue of the Bul- letin]. Par. 9. Section 1.368–3 is added to read as follows: §1.368–3 Records to be kept and information to be filed with returns. [The text of the proposed §1.368–3 is the same as the text for §1.368–3T pub- lished elsewhere in this issue of the Bul- letin]. Par. 10. Section 1.381(b)–1 is amended by revising paragraph (b)(3) and adding paragraph (e) to read as follows: §1.381(b)–1 Operating rules applicable to carryovers in certain corporate acquisitions. [The text of the proposed amendment to §1.381(b)–1 is the same as the text for §1.381(b)–1T published elsewhere in this issue of the Bulletin]. Par. 11. Section 1.382–8 is amended by: 1. Revising paragraphs (c)(2) and (h). 2. Redesignating paragraph (e)(4) as paragraph (e)(5). 3. Adding new paragraphs (e)(4) and (j)(4). The additions and revisions read as fol- lows: §1.382–8 Controlled groups. [The text of the proposed amendment to §1.382–8 is the same as the text for §1.382–8T published elsewhere in this is- sue of the Bulletin]. Par. 12. Section 1.382–11 is added to read as follows: June 26, 200611852006–26 I.R.B. §1.382–11 Reporting requirements. [The text of the proposed §1.382–11 is the same as the text for §1.382–11T pub- lished elsewhere in this issue of the Bul- letin]. Par. 13. Section 1.1081–11 is added to read as follows: §1.1081–11 Records to be kept and information to be filed with returns. [The text of the proposed §1.1081–11 is the same as the text for §1.1081–11T published elsewhere in this issue of the Bulletin]. Par. 14. Section 1.1221–2 is amended by revising paragraph (e)(2)(iv) and adding paragraphs (i) through (j) to rea d as follows: §1.1221–2 Hedging transactions. [The text of the proposed amendment to §1.1221–2 is the same as the text for §1.1221–2T published elsewhere in this is- sue of the Bulletin]. Par. 15. Section 1.1502–13 is amended by revising paragraphs (f)(5)(ii)(E) and (f)(6)(i)(C)(2) and adding paragraph (m) to read as follows: §1.1502–13 Intercompany transactions. [The text of the proposed amendment to §1.1502–13 is the same as the text for §1.1502–13T published elsewhere in this issue of the Bulletin]. Par. 16. Section 1.1502–31 is amended by revising paragraph (e)(2) and adding paragraphs (i) through (j) to read as fol- lows: §1.1502–31 Stock basis after a group structure change. [The text of the proposed amendment to §1.1502–31 is the same as the text for §1.1502–31T published elsewhere in this issue of the Bulletin]. Par. 17. Section 1.1502–32 is amended by revising paragraph (b)(4)(iv) and adding paragraphs (i) through (j) to read as follows: §1.1502–32 Investment adjustments. [The text of the proposed amendment to §1.1502–32 is the same as the text for §1.1502–32T published elsewhere in this issue of the Bulletin]. Par. 18. Section 1.1502–33 is amended by revising paragraph (d)(5)(i)(D) and adding paragraph (k) to read as follows: §1.1502–33 Earnings and profits. [The text of the proposed amendment to §1.1502–33 is the same as the text for §1.1502–33T published elsewhere in this issue of the Bulletin]. Par. 19. Section 1.1502–35 is amended by revising paragraph (c)(4)(i) and adding paragraph (k) to read as follows: §1.1502–35 Transfers of subsidiary stock and deconsolidations of subsidiaries. [The text of the proposed amendment to § 1.1502–35 is the same as the text of §1.1502–35T published elsewhere in this issue of the Bulletin]. Par. 20. Section 1.1502–76 is amended by revising paragraph (b)(2)(ii)(D) and adding paragraph (d) to read as follows: §1.1502–76 Taxable year of members of group. [The text of the proposed amendment to §1.1502–76 is the same as the text for §1.1502–76T published elsewhere in this issue of the Bulletin]. Par. 21. Section 1.1502–95 is amended by revising paragraphs (e)(8) and (f) and adding paragraph (g) to read as follows: §1.1502–95 Rules on ceasing to be a member of a consolidated group (or loss subgroup). [The text of the proposed amendment to §1.1502–95 is the same as the text for §1.1502–95T published elsewhere in this issue of the Bulletin]. Par. 22. Section 1.1563–1 is amended by revising paragraph (c)(2) and adding paragraph (e) to read as follows: §1.1563–1 Definition of controlled group of corporations and component members. [The text of the proposed amendment to §1.1563–1 is the same as the text for §1.1563–1T published elsewhere in this is- sue of the Bulletin]. Par. 23. Section 1.1563–3 is amended by revising paragraph (d)(2)(iv) and adding paragraph (e) to read as follows: §1.1563–3 Rules for determining stock ownership. [The text of the proposed amendment to §1.1563–3 is the same as the text for §1.1563–3T published elsewhere in this is- sue of the Bulletin]. Par. 24. Section 1.6012–2 is amended by revising paragraph (c) and adding para- graph (k) to read as follows: §1.6012–2 Corporations required to make returns of income. [The text of the proposed amendment to §1.6012–2 is the same as the text for §1.6012–2T published elsewhere in this is- sue of the Bulletin]. Mark E. Matthews, Deputy Commissioner for Services and Enforcement. (Filed by the Office of the Federal Register on May 26, 2006, 8:45 a.m., and published in the issue of the Federal Register for May 30, 2006, 71 F.R. 30640) Correction to the 2005 Form 6765, Credit for Increasing Research Activities Announcement 2006–39 The 2005 Form 6765 has been revised to show that only 20% (instead of 100%) of the energy research consortia expense is included in the alternative incremental credit. Under Section B—Alternative In- cremental Credit, the following changes are made: •Line 21 is changed to line 21a •Line 21b is added to show the sum of lines 18 and 21a. •The line 22 text is changed to incorpo- rate line 21b. •The reference to line 18 in the line 40 text is deleted. A corrected version of 2005 Form 6765,Credit for Increasing Research Ac- tivities, is now available for download at http://www.irs.gov/pub/irs-pdf/f6765.pdf 2006–26 I.R.B.1186June 26, 2006 Notice of Disposition of Declaratory Judgment Proceedings Under Section 7428 Announcement 2006–40 This announcement serves notice to donors that on May 9, 2006, the United States Court of Federal Claims entered Stipulations of Dismissal with Prejudice pursuant to the agreement of the parties that the organizations listed below are described in section 501(c)(3) and are rec- ognized as exempt from tax under section 501(a), effective as of the dates in paren- theses. Northern Riverview, Inc. Monsey, NY (January 1, 2000) Fountainview at College Road, Inc. Monsey, NY (January 1, 2000) Northern Metropolitan, Inc. Monsey, NY (January 1, 2000) Northern Manor Multicare, Inc. Nanuet, NY (January 1, 2000) Northern Services Group, Inc. Monsey, NY (January 1, 2001) Notice of Disposition of Declaratory Judgment Proceedings Under Section 7428 Announcement 2006–41 This announcement serves notice to donors that on May 12, 2006, pursuant to agreement of the parties, the United States Tax Court entered a decision declaring that the organization listed below is described in section 501(c)(3) and is recognized as exempt from tax under section 501(a), effective as of the date in parenthesis. Northern Metropolitan Foundation for Healthcare, Inc. Monsey, NY (January 1, 2000) June 26, 200611872006–26 I.R.B. Definition of Terms Revenue rulings and revenue procedures (hereinafter referred to as “rulings”) that have an effect on previous rulings use the following defined terms to describe the ef- fect: Amplifieddescribes a situation where no change is being made in a prior pub- lished position, but the prior position is be- ingextendedtoapplytoavariationofthe fact situation set forth therein. Thus, if an earlier ruling held that a principle ap- plied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare withmodi- fied,below). Clarifiedis used in those instances where the language in a prior ruling is be- ing made clear because the language has caused, or may cause, some confusion. It is not used where a position in a prior ruling is being changed. Distinguisheddescribes a situation where a ruling mentions a previously pub- lished ruling and points out an essential difference between them. Modifiedis used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a published position. (Compare withamplifiedandclarified, above). Obsoleteddescribes a previously pub- lished ruling that is not considered deter- minative with respect to future transac- tions. This term is most commonly used in a ruling that lists previously published rul- ings that are obsoleted because of changes in laws or regulations. A ruling may also be obsoleted because the substance has been included in regulations subsequently adopted. Revokeddescribes situations where the position in the previously published ruling is not correct and the correct position is beingstatedinanewruling. Supersededdescribes a situation where the new ruling does nothing more than re- state the substance and situation of a previ- ously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same po- sition published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single rul- ing a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new rul- ing does more than restate the substance of a prior ruling, a combination of terms is used. For example,modifiedandsu- persededdescribes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously pub- lished ruling is first modified and then, as modified, is superseded. Supplementedis used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original rul- ing has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the ad- ditions, and supersedes all prior rulings in the series. Suspendedis used in rare situations to show that the previous published rul- ings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study. Abbreviations The fol lowing abbreviations in current use and for merly used will appear in material publis hedintheBulletin. A—Individual. Acq.—A cquiescence. B—Individual. BE—Beneficiary. BK—Bank . B.T.A.—Board of Tax Appeals. C—Individual. C.B.—Cu mulative Bulletin. CFR—Code of Federal Regulations. CI—City. COOP—Coo perative. Ct.D.—Court Decision. CY—County. D—Decede nt. DC—Dummy Corporation. DE—Donee. Del. Order —Delegation Order. DISC—Domestic International Sales Corporation. DR—Donor. E—Estate. EE—Employee. E.O.—Executive Order. ER—Emp loyer. ERISA—Employee Retirement Income Security Act. EX—Executor. F—Fiduc iary. FC—Foreign Country. FICA—Federal Insurance Contributions Act. FISC—Fo reign International Sales Company. FPH—Foreign Personal Holding Company. F.R.—Federal Register. FUTA—Fed eral Unemployment Tax Act. FX—Foreign corporation. G.C.M.—Chief Counsel’s Memorandum. GE—Grante e. GP—General Partner. GR—Grantor. IC—Insura nce Company. I.R.B.—Internal Revenue Bulletin. LE—Lessee. LP—Limited Partner. LR—Lessor. M—Minor. Nonacq.—No nacquiescence. O—Organization. P—Parent Corporation. PHC—Persona l Holding Company. PO—Possession of the U.S. PR—Partner. PRS—Pa rtnership. PTE—Prohibited Transaction Exemption. Pub. L.—Public Law. REIT—Re al Estate Investment Trust. Rev. Proc.—Revenue Procedure. Rev. Rul.—Revenue Ruling. S—Subsi diary. S.P.R.—Statement of Procedural Rules. Stat.—Statutes at Large. T—Target Corporation. T.C.—Tax Court. T.D.—Treasury Decision. TFE—Trans feree. TFR—Transferor. T.I.R.—Technical Information Release. TP—Taxpay er. TR—Trust. TT—Trustee. U.S.C.—Uni ted States Code. X—Corporation. Y—Corporation. Z—Corporat ion. 2006–26 I.R.B.iJune 26, 2006 Numerical Finding List 1 Bulletin 2006–1 through 2006–26 Announcements: 2006-1, 2006-1 I.R.B.260 2006-2, 2006-2 I.R.B.300 2006-3, 2006-3 I.R.B.327 2006-4, 2006-3 I.R.B.328 2006-5, 2006-4 I.R.B.378 2006-6, 2006-4 I.R.B.340 2006-7, 2006-4 I.R.B.342 2006-8, 2006-4 I.R.B.344 2006-9, 2006-5 I.R.B.392 2006-10, 2006-5 I.R.B.393 2006-11, 2006-6 I.R.B.420 2006-12, 2006-6 I.R.B.421 2006-13, 2006-7 I.R.B.462 2006-14, 2006-8 I.R.B.516 2006-15, 2006-11 I.R.B.632 2006-16, 2006-12 I.R.B.653 2006-17, 2006-12 I.R.B.653 2006-18, 2006-12 I.R.B.654 2006-19, 2006-13 I.R.B.674 2006-20, 2006-13 I.R.B.675 2006-21, 2006-14 I.R.B.703 2006-22, 2006-16 I.R.B.779 2006-23, 2006-14 I.R.B.729 2006-24, 2006-16 I.R.B.820 2006-25, 2006-18 I.R.B.871 2006-26, 2006-18 I.R.B.871 2006-27, 2006-18 I.R.B.871 2006-28, 2006-18 I.R.B.873 2006-29, 2006-19 I.R.B.879 2006-30, 2006-19 I.R.B.879 2006-31, 2006-20 I.R.B.912 2006-32, 2006-20 I.R.B.913 2006-33, 2006-20 I.R.B.914 2006-34, 2006-21 I.R.B.937 2006-35, 2006-24 I.R.B.1061 2006-36, 2006-23 I.R.B.1038 2006-37, 2006-23 I.R.B.1039 2006-38, 2006-24 I.R.B.1062 2006-39, 2006-26 I.R.B.1186 2006-40, 2006-26 I.R.B.1187 2006-41, 2006-26 I.R.B.1187 Court Decisions: 2081, 2006-13 I.R.B.656 2082, 2006-14 I.R.B.697 Notices: 2006-1, 2006-4 I.R.B.347 2006-2, 2006-2 I.R.B.278 2006-3, 2006-3 I.R.B.306 2006-4, 2006-3 I.R.B.307 Notices— Continued: 2006-5, 2006-4 I.R.B.348 2006-6, 2006-5 I.R.B.385 2006-7, 2006-10 I.R.B.559 2006-8, 2006-5 I.R.B.386 2006-9, 2006-6 I.R.B.413 2006-10, 2006-5 I.R.B.386 2006-11, 2006-7 I.R.B.457 2006-12, 2006-7 I.R.B.458 2006-13, 2006-8 I.R.B.496 2006-14, 2006-8 I.R.B.498 2006-15, 2006-8 I.R.B.501 2006-16, 2006-9 I.R.B.538 2006-17, 2006-10 I.R.B.559 2006-18, 2006-8 I.R.B.502 2006-19, 2006-9 I.R.B.539 2006-20, 2006-10 I.R.B.560 2006-21, 2006-12 I.R.B.643 2006-22, 2006-11 I.R.B.593 2006-23, 2006-11 I.R.B.594 2006-24, 2006-11 I.R.B.595 2006-25, 2006-11 I.R.B.609 2006-26, 2006-11 I.R.B.622 2006-27, 2006-11 I.R.B.626 2006-28, 2006-11 I.R.B.628 2006-29, 2006-12 I.R.B.644 2006-30, 2006-24 I.R.B.1044 2006-31, 2006-15 I.R.B.751 2006-32, 2006-13 I.R.B.677 2006-33, 2006-15 I.R.B.754 2006-34, 2006-14 I.R.B.705 2006-35, 2006-14 I.R.B.708 2006-36, 2006-15 I.R.B.756 2006-37, 2006-18 I.R.B.855 2006-38, 2006-16 I.R.B.777 2006-39, 2006-17 I.R.B.841 2006-40, 2006-18 I.R.B.855 2006-41, 2006-18 I.R.B.857 2006-42, 2006-19 I.R.B.878 2006-43, 2006-21 I.R.B.921 2006-44, 2006-20 I.R.B.889 2006-45, 2006-20 I.R.B.891 2006-46, 2006-24 I.R.B.1044 2006-47, 2006-20 I.R.B.892 2006-48, 2006-21 I.R.B.922 2006-49, 2006-22 I.R.B.943 2006-50, 2006-25 I.R.B.1141 2006-51, 2006-25 I.R.B.1144 2006-52, 2006-26 I.R.B.1175 2006-53, 2006-26 I.R.B.1180 2006-54, 2006-26 I.R.B.1180 2006-55, 2006-25 I.R.B.1146 Proposed Regulations: REG-107722-00, 2006-4 I.R.B.354 REG-104385-01, 2006-5 I.R.B.389 Proposed Regulations— Continued: REG-122380-02, 2006-10 I.R.B.563 REG-137243-02, 2006-3 I.R.B.317 REG-139059-02, 2006-24 I.R.B.1052 REG-144784-02, 2006-23 I.R.B.1036 REG-133446-03, 2006-2 I.R.B.299 REG-113365-04, 2006-10 I.R.B.580 REG-148568-04, 2006-6 I.R.B.417 REG-106418-05, 2006-7 I.R.B.461 REG-133036-05, 2006-20 I.R.B.911 REG-134317-05, 2006-26 I.R.B.1184 REG-138879-05, 2006-8 I.R.B.503 REG-143244-05, 2006-6 I.R.B.419 REG-146384-05, 2006-17 I.R.B.843 REG-146459-05, 2006-8 I.R.B.504 REG-157271-05, 2006-12 I.R.B.652 REG-164247-05, 2006-15 I.R.B.758 REG-111578-06, 2006-24 I.R.B.1060 Revenue Procedures: 2006-1, 2006-1 I.R.B.1 2006-2, 2006-1 I.R.B.89 2006-3, 2006-1 I.R.B.122 2006-4, 2006-1 I.R.B.132 2006-5, 2006-1 I.R.B.174 2006-6, 2006-1 I.R.B.204 2006-7, 2006-1 I.R.B.242 2006-8, 2006-1 I.R.B.245 2006-9, 2006-2 I.R.B.278 2006-10, 2006-2 I.R.B.293 2006-11, 2006-3 I.R.B.309 2006-12, 2006-3 I.R.B.310 2006-13, 2006-3 I.R.B.315 2006-14, 2006-4 I.R.B.350 2006-15, 2006-5 I.R.B.387 2006-16, 2006-9 I.R.B.539 2006-17, 2006-14 I.R.B.709 2006-18, 2006-12 I.R.B.645 2006-19, 2006-13 I.R.B.677 2006-20, 2006-17 I.R.B.841 2006-21, 2006-24 I.R.B.1050 2006-22, 2006-23 I.R.B.1033 2006-23, 2006-20 I.R.B.900 2006-24, 2006-22 I.R.B.943 2006-25, 2006-21 I.R.B.926 2006-26, 2006-21 I.R.B.936 2006-27, 2006-22 I.R.B.945 2006-28, 2006-25 I.R.B.1147 Revenue Rulings: 2006-1, 2006-2 I.R.B.261 2006-2, 2006-2 I.R.B.261 2006-3, 2006-2 I.R.B.276 2006-4, 2006-2 I.R.B.264 2006-5, 2006-3 I.R.B.302 2006-6, 2006-5 I.R.B.381 1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2005–27 through 2005–52 is in Internal Revenue Bulletin 2005–52, dated December 27, 2005. June 26, 2006ii2006–26 I.R.B. Revenue Rulings— Continued: 2006-7, 2006-6 I.R.B.399 2006-8, 2006-9 I.R.B.520 2006-9, 2006-9 I.R.B.519 2006-10, 2006-10 I.R.B.557 2006-11, 2006-12 I.R.B.635 2006-12, 2006-12 I.R.B.637 2006-13, 2006-13 I.R.B.656 2006-14, 2006-15 I.R.B.740 2006-15, 2006-13 I.R.B.661 2006-16, 2006-14 I.R.B.694 2006-17, 2006-15 I.R.B.748 2006-18, 2006-15 I.R.B.743 2006-19, 2006-15 I.R.B.749 2006-20, 2006-15 I.R.B.746 2006-21, 2006-15 I.R.B.745 2006-22, 2006-14 I.R.B.687 2006-23, 2006-17 I.R.B.839 2006-24, 2006-19 I.R.B.875 2006-25, 2006-20 I.R.B.882 2006-26, 2006-22 I.R.B.939 2006-27, 2006-21 I.R.B.915 2006-28, 2006-22 I.R.B.938 2006-29, 2006-23 I.R.B.1031 2006-30, 2006-25 I.R.B.1134 2006-31, 2006-25 I.R.B.1133 2006-32, 2006-26 I.R.B.1170 2006-33, 2006-26 I.R.B.1148 2006-34, 2006-26 I.R.B.1171 Tax Conventions: 2006-6, 2006-4 I.R.B.340 2006-7, 2006-4 I.R.B.342 2006-8, 2006-4 I.R.B.344 2006-19, 2006-13 I.R.B.674 2006-20, 2006-13 I.R.B.675 2006-21, 2006-14 I.R.B.703 Treasury Decisions: 9231, 2006-2 I.R.B.272 9232, 2006-2 I.R.B.266 9233, 2006-3 I.R.B.303 9234, 2006-4 I.R.B.329 9235, 2006-4 I.R.B.338 9236, 2006-5 I.R.B.382 9237, 2006-6 I.R.B.394 9238, 2006-6 I.R.B.408 9239, 2006-6 I.R.B.401 9240, 2006-7 I.R.B.454 9241, 2006-7 I.R.B.427 9242, 2006-7 I.R.B.422 9243, 2006-8 I.R.B.475 9244, 2006-8 I.R.B.463 9245, 2006-14 I.R.B.696 9246, 2006-9 I.R.B.534 9247, 2006-9 I.R.B.521 9248, 2006-9 I.R.B.524 9249, 2006-10 I.R.B.546 Treasury Decisions— Continued: 9250, 2006-11 I.R.B.588 9251, 2006-11 I.R.B.590 9252, 2006-12 I.R.B.633 9253, 2006-14 I.R.B.689 9254, 2006-13 I.R.B.662 9255, 2006-15 I.R.B.741 9256, 2006-16 I.R.B.770 9257, 2006-17 I.R.B.821 9258, 2006-20 I.R.B.886 9259, 2006-19 I.R.B.874 9260, 2006-23 I.R.B.1001 9261, 2006-21 I.R.B.919 9262, 2006-24 I.R.B.1040 9263, 2006-25 I.R.B.1063 9264, 2006-26 I.R.B.1150 2006–26 I.R.B.iiiJune 26, 2006 Finding List of Current Actions on Previously Published Items 1 Bulletin 2006–1 through 2006–26 Announcements: 2000-48 Modified by Notice 2006-35, 2006-14 I.R.B.708 Notices: 89-85 Amplified by Notice 2006-46, 2006-24 I.R.B.1044 2001-4 Sections (V)(C), (D), and (E) superseded by T.D. 9253, 2006-14 I.R.B.689 2001-11 Superseded by T.D. 9253, 2006-14 I.R.B.689 2001-43 Modified by Notice 2006-35, 2006-14 I.R.B.708 Sections 2 and 3 superseded by T.D. 9253, 2006-14 I.R.B.689 2002-35 Clarified and modified by Notice 2006-16, 2006-9 I.R.B.538 2005-14 Obsoleted for taxable years beginning on or after June 1, 2006, by T.D. 9263, 2006-25 I.R.B.1063 2005-30 Modified and superseded by Notice 2006-31, 2006-15 I.R.B.751 2005-44 Supplemented by Notice 2006-1, 2006-4 I.R.B.347 2005-66 Supplemented by Notice 2006-20, 2006-10 I.R.B.560 2005-73 Supplemented by Notice 2006-20, 2006-10 I.R.B.560 2005-79 Revoked by Notice 2006-50, 2006-25 I.R.B.1141 2005-81 Supplemented by Notice 2006-20, 2006-10 I.R.B.560 Notices— Continued: 2005-98 Supplemented by Notice 2006-7, 2006-10 I.R.B.559 2006-26 Clarified by Notice 2006-53, 2006-26 I.R.B.1180 Proposed Regulations: REG-103829-99 Withdrawn by Ann. 2006-16, 2006-12 I.R.B.653 REG-150313-01 Withdrawn by Ann. 2006-30, 2006-19 I.R.B.879 REG-131739-03 Corrected by Ann. 2006-10, 2006-5 I.R.B.393 REG-131264-04 Withdrawn by Ann. 2006-34, 2006-21 I.R.B.937 REG-138647-04 Corrected by Ann. 2006-4, 2006-3 I.R.B.328 REG-158080-04 Corrected by Ann. 2006-11, 2006-6 I.R.B.420 Revenue Procedures: 81-17 Obsoleted by Rev. Proc. 2006-24, 2006-22 I.R.B.943 89-8 Superseded by Rev. Proc. 2006-23, 2006-20 I.R.B.900 89-56 Modified by Rev. Proc. 2006-21, 2006-24 I.R.B.1050 90-39 Modified by Rev. Proc. 2006-21, 2006-24 I.R.B.1050 96-52 Superseded by Rev. Proc. 2006-10, 2006-2 I.R.B.293 97-27 Modified by Rev. Proc. 2006-11, 2006-3 I.R.B.309 Modified and amplified by Rev. Proc. 2006-12, 2006-3 I.R.B.310 Revenue Procedures— Continued: 2002-9 Modified by Rev. Proc. 2006-11, 2006-3 I.R.B.309 Modified and amplified by Notice 2006-47, 2006-20 I.R.B.892 Rev. Proc. 2006-12, 2006-3 I.R.B.310 Rev. Proc. 2006-14, 2006-4 I.R.B.350 Rev. Proc. 2006-16, 2006-9 I.R.B.539 2002-17 Modified by Rev. Proc. 2006-14, 2006-4 I.R.B.350 2002-32 Modified by Rev. Proc. 2006-21, 2006-24 I.R.B.1050 2002-52 Modified by Rev. Proc. 2006-26, 2006-21 I.R.B.936 2003-31 Superseded by Rev. Proc. 2006-19, 2006-13 I.R.B.677 2003-38 Modified by Rev. Proc. 2006-16, 2006-9 I.R.B.539 2003-44 Modified and superseded by Rev. Proc. 2006-27, 2006-22 I.R.B.945 2004-23 Superseded for certain taxable years by Rev. Proc. 2006-12, 2006-3 I.R.B.310 2004-40 Superseded by Rev. Proc. 2006-9, 2006-2 I.R.B.278 2005-1 Superseded by Rev. Proc. 2006-1, 2006-1 I.R.B.1 2005-2 Superseded by Rev. Proc. 2006-2, 2006-1 I.R.B.89 2005-3 Superseded by Rev. Proc. 2006-3, 2006-1 I.R.B.122 2005-4 Superseded by Rev. Proc. 2006-4, 2006-1 I.R.B.132 2005-5 Superseded by Rev. Proc. 2006-5, 2006-1 I.R.B.174 1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2005–27 through 2005–52 is in Internal Revenue Bulletin 2005–52, dated December 27, 2005. June 26, 2006iv2006–26 I.R.B. Revenue Procedures— Continued: 2005-6 Superseded by Rev. Proc. 2006-6, 2006-1 I.R.B.204 2005-7 Superseded by Rev. Proc. 2006-7, 2006-1 I.R.B.242 2005-8 Superseded by Rev. Proc. 2006-8, 2006-1 I.R.B.245 2005-9 Superseded for certain taxable years by Rev. Proc. 2006-12, 2006-3 I.R.B.310 2005-12 Section 10 modified and superseded by Rev. Proc. 2006-1, 2006-1 I.R.B.1 2005-15 Obsoleted in part by Rev. Proc. 2006-17, 2006-14 I.R.B.709 2005-21 Superseded by Rev. Proc. 2006-25, 2006-21 I.R.B.926 2005-22 Obsoleted by Rev. Proc. 2006-20, 2006-17 I.R.B.841 2005-24 Modified by Notice 2006-15, 2006-8 I.R.B.501 2005-61 Superseded by Rev. Proc. 2006-3, 2006-1 I.R.B.122 2005-68 Superseded by Rev. Proc. 2006-1, 2006-1 I.R.B.1 Rev. Proc. 2006-3, 2006-1 I.R.B.122 Revenue Rulings: 55-355 Obsoleted by T.D. 9244, 2006-8 I.R.B.463 74-503 Revoked by Rev. Rul. 2006-2, 2006-2 I.R.B.261 75-365 Revoked by Rev. Rul. 2006-34, 2006-26 I.R.B.1171 75-367 Revoked in part by Rev. Rul. 2006-34, 2006-26 I.R.B.1171 77-230 Obsoleted by T.D. 9249, 2006-10 I.R.B.546 Revenue Rulings— Continued: 91-5 Modified by T.D. 9250, 2006-11 I.R.B.588 92-19 Supplemented in part by Rev. Rul. 2006-25, 2006-20 I.R.B.882 92-86 Modified by T.D. 9250, 2006-11 I.R.B.588 2000-2 Modified and superseded by Rev. Rul. 2006-26, 2006-22 I.R.B.939 2006-1 Modified and clarified by Rev. Rul. 2006-31, 2006-25 I.R.B.1133 2006-25 Corrected by Ann. 2006-35, 2006-24 I.R.B.1061 Treasury Decisions: 9191 Corrected by Ann. 2006-26, 2006-18 I.R.B.871 9192 Corrected by Ann. 2006-15, 2006-11 I.R.B.632 9203 Corrected by Ann. 2006-12, 2006-6 I.R.B.421 9243 Corrected by Ann. 2006-38, 2006-24 I.R.B.1062 9244 Corrected by Ann. 2006-31, 2006-20 I.R.B.912 9248 Corrected by Ann. 2006-32, 2006-20 I.R.B.913 2006–26 I.R.B.vJune 26, 2006 INDEX Internal Revenue Bulletins 2006–1 through 2006–26 The abbreviation and number in parenthesis following the index entry refer to the specific item; numbers in roman and italic type following the parentheses refer to the Internal Revenue Bulletin in which the item may be found and the page number on which it appears. Key to Abbreviations: AnnAnnouncement CDCourt Decision DODelegation Order EOExecutive Order PLPublic Law PTEProhibited Transaction Exemption RPRevenue Procedure RRRevenue Ruling SPRStatement of Procedural Rules TCTax Convention TDTreasury Decision TDOTreasury Department Order EMPLOYEE PLANS Determination letters, issuing procedures (RP 6) 1,204 Disaster relief, expanded postponement of deadlines for certain acts under section 7508A with respect to taxpayers affected by Hurricane Katrina (Notice 20) 10,560 Disclosure of relative values of optional forms of benefit (TD 9256) 16,770 Employee Plans Compliance Resolution System (EPCRS), cor- rection programs (RP 27) 22,945 Full funding limitations, weighted average interest rate for: January 2006 (Notice 8) 5,386 February 2006 (Notice 19) 9,539 March 2006 (Notice 32) 13,677 April 2006 (Notice 39) 17,841 May2006(Notice49)22,943 June 2006 (Notice 55) 25,1146 Letter rulings: And determination letters, areas which will not be issued from: Associates Chief Counsel and Division Counsel (TE/GE) (RP 3) 1,122 Associate Chief Counsel (International) (RP 7) 1,242 And information letters, procedures (RP 4) 1,132 User fees, request for letter rulings (RP 8) 1,245 Proposed regulations: 26 CFR 1.402(g)–1, amended; 1.402A–1, –2, added; 1.403(b)–2, –3, –5, –7, amended; 1.408A–10, added; designated Roth accounts under section 402A (REG–146459–05) 8,504 Regulations: 26 CFR 1.401(a)–20, amended; 1.417(a)(3)–1, amended; dis- closure of relative values of optional forms of benefit (TD 9256) 16,770 EMPLOYEE PLANS—Cont. 26 CFR 1.401(k)–0, –2, –6, amended; 1.401(k)–1(f), revised; 1.401(m)–0, –2, –5, amended; 602.101, amended; desig- nated Roth contributions to cash or deferred arrangements under section 401(k) (TD 9237) 6,394 Retirement plans, sample amendment for Roth section 401(k) plan (Notice 44) 20,889 Roth IRAs: Designated Roth contributionsto cash or deferred arrange- ments under section 401(k) (TD 9237) 6,394 Distributions of designated Roth contributions (REG–146459–05) 8,504 Reporting requirements, fair market value, Roth IRA conver- sion (RP 13) 3,315 Technical advice to IRS employees (RP 5) 1,174 EMPLOYMENT TAX Bankruptcy estate, unpaid tax liability, procedure for trustees to obtain determination by the Service (RP 24) 22,943 Disaster relief: Backup withholding, postponement of deadlines for certain acts due to Hurricanes Katrina and Rita (Notice 12) 7,458 Expanded postponement of deadlines for certain acts under section 7508A with respect to taxpayers affected by Hurri- cane Katrina (Notice 20) 10,560 Hurricane Katrina, treatment of special evacuation al- lowances (Notice 10) 5,386 Letter rulings and information letters issued by Associate Of- fices, determination letters issued by Operating Divisions (RP 1) 1,1 Proposed regulations: 26 CFR 31.6011(a)–1, –4, amended; 31.6302–1, amended; time for filing employment tax returns and modifications to the deposit rules (REG–148568–04) 6,417 Publications: 1223, General Rules and Specifications for Substitute Forms W-2c and W-3c, revised (RP 19) 13,677 4436, General Rules and Specifications for Substitute Form 941 and Schedule B (Form 941), revised (RP 25) 21,926 Regulations: 26 CFR 1.6302–1, –2, amended; 31.6011(a)–1, –4, amended; 31.6011(a)–1T, –4T, added; 31.6071(a)–1, amended; 31.6302–0, –1, amended; 31.6302–1T, added; time for filing employment tax returns and modifications to the deposit rules (TD 9239) 6,401 26 CFR 31.3121(a)(2)–1, amended; 32.1, amended; sickness or accident disability payments (TD 9233) 3,303 Substitute forms: W-2c and W-3c, general rules and specifications (RP 19) 13, 677 941 and Schedule B (Form 941), general rules and specifica- tions (RP 25) 21,926 Technical Advice Memoranda (TAMs) and Technical Expedited Advice Memoranda (TEAMs) (RP 2) 1,89 June 26, 2006vi2006–26 I.R.B. EMPLOYMENT TAX—Cont. Time for filing employment tax returns and modifications to the deposit rules (TD 9239) 6,401; (REG–148568–04) 6,417 Treatment of sickness or accident disability payments (TD 9233) 3,303 ESTATE TAX Disaster relief, expanded postponement of deadlines for certain acts under section 7508A with respect to taxpayers affected by Hurricane Katrina (Notice 20) 10,560 Individual retirement account (IRA), marital trust as IRA bene- ficiary, qualifying income interest (RR 26) 22,939 Interest rates, farm real property, special use value (RR 32) 26, 1170 Letter rulings and information letters issued by Associate Of- fices, determination letters issued by Operating Divisions (RP 1) 1,1 Real property interest, determination of whether certain interests constitute closely held business interest (RR 34) 26,1171 Technical Advice Memoranda (TAMs) and Technical Expedited Advice Memoranda (TEAMs) (RP 2) 1,89 EXCISE TAX Bankruptcy estate, unpaid tax liability, procedure for trustees to obtain determination by the Service (RP 24) 22,943 Disaster relief, expanded postponement of deadlines for certain acts under section 7508A with respect to taxpayers affected by Hurricane Katrina (Notice 20) 10,560 Health Savings Accounts (HSAs), employer comparable contri- butions, public hearing on REG–138647–04 (Ann 4) 3,328 Highway vehicle, definition, withdrawal of REG–103829–99 (Ann 16) 12,653 Letter rulings and information letters issued by Associate Of- fices, determination letters issued by Operating Divisions (RP 1) 1,1 Technical Advice Memoranda (TAMs) and Technical Expedited Advice Memoranda (TEAMs) (RP 2) 1,89 Telecommunications excise tax on toll telephone service (Notice 50) 25,1141 EXEMPT ORGANIZATIONS Annual notice to donors regarding pending and settled declara- tory judgment suits (Ann 1) 1,260 Determination of gross receipts for purposes of section 501(c)(15), insurance companies (Notice 42) 19,878 Disaster relief, expanded postponement of deadlines for certain acts under section 7508A with respect to taxpayers affected by Hurricane Katrina (Notice 20) 10,560 Down payment assistance, home buyers (RR 27) 21,915 Information reporting by organizations that receive charitable contributions of certain motor vehicles, boats, and airplanes (Notice 1) 4,347 EXEMPT ORGANIZATIONS—Cont. Letter rulings: And determination letters, areas which will not be issued from Associates Chief Counsel and Division Counsel (TE/GE) (RP 3) 1,122 And information letters, procedures (RP 4) 1,132 User fees, request for letter rulings (RP 8) 1,245 List of organizations classified as private foundations (Ann 5) 4, 378; (Ann 14) 8,516; (Ann 18) 12,654; (Ann 27) 18,871; (Ann 36) 23,1038 Revocations (Ann 3) 3,327;(Ann9)5,392; (Ann 13) 7,462; (Ann 17) 12,653; (Ann 24) 16,820; (Ann 28) 18,873;(Ann 33) 20,914; (Ann 37) 23,1039 Technical advice to IRS employees (RP 5) 1,174 GIFT TAX Charitable remainder trusts, waiver of spousal right of election to ensure qualification of charitable remainder annuity trust (CRAT) or charitable remainder unitrust (CRUT) (Notice 15) 8,501 Disaster relief, expanded postponement of deadlines for certain acts under section 7508A with respect to taxpayers affected by Hurricane Katrina (Notice 20) 10,560 Letter rulings and information letters issued by Associate Of- fices, determination letters issued by Operating Divisions (RP 1) 1,1 Technical Advice Memoranda (TAMs) and Technical Expedited Advice Memoranda (TEAMs) (RP 2) 1,89 INCOME TAX Acceptance agent revenue procedure (RP 10) 2,293 Accounting methods: Automatic consent to change procedures (RP 12) 3,310 Automatic consent to change, replacement cost method for parts inventory of heavy equipment dealers (RP 14) 4,350 Normalization public utilities (REG–104385–01) 5,389 Simplified service cost and simplified production methods, consent procedures (RP 11) 3,309 Advance Pricing Agreement (APA) Program: Administration (RP 9) 2,278 Annual report to the public, 2005 (Ann 22) 16,779 Agent for a consolidated group with foreign common parent (TD 9255) 15,741; (REG–164247–05) 15,758 Aircraft and vessel leasing income, modifications to subpart F treatment (Notice 48) 21,922 Allocation and apportionment of expenses, tax book value method (TD 9247) 9,521 Annual notice to donors regarding pending and settled declara- tory judgment suits (Ann 1) 1,260 Application of section 108 to members of a consolidated group, correctiontoTD9192(Ann15)11,632 Automobile owners and lessees, inflation adjustment for 2006 (RP 18) 12,645 2006–26 I.R.B.viiJune 26, 2006 INCOME TAX—Cont. Bankruptcy estate, unpaid tax liability, procedure for trustees to obtain determination by the Service (RP 24) 22,943 Bonds: Clean renewable energy bonds (Notice 7) 10,559 Exempt facility bonds, qualified highway or surface freight transfer facilities (Notice 45) 20,891 Gulf Opportunity Zone Bonds, Gulf Opportunity Zone Ad- vance Refunding Bonds, and Gulf Tax Credit Bonds (No- tice 41) 18,857 Private activity bond, definition, tax-exempt bonds issued by state and local governments (TD 9234) 4,329 Book-tax filter of reportable transactions under regulations sec- tion 1.6011–4, removal (Notice 6) 5,385 Commercial revitalization deduction for buildings located in the expanded area of a renewal community (RP 16) 9,539 Competent authority procedureswith respect to the U.S. posses- sions (RP 23) 20,900 Computer software, domestic production activities deduc- tion under section 199(c)(5)(B) (TD 9262) 24,1040; (REG–111578–06) 24,1060 Consolidated returns: Basis reallocation, loss suspension, and expiration of losses on certain stock dispositions (TD 9254) 13,662 E-filing, corporate tax returns (RP 21) 24,1050 Intercompany transactions (TD 9261) 21,919;withdrawalof REG–131264–04 (Ann 34) 21,937 Corporations: Clarification of section 1374 effective dates (TD 9236) 5,382 Consolidated returns, e-filingcorporate tax returns (RP 21) 24,1050 Determination of surrogate foreign corporation status when there is an expanded affiliated group (TD 9238) 6,408; (REG–143244–05) 6,419 Entity classification,classification of: Foreign entities, per se corporations (TD 9235) 4,338 Japanese Tokurei Yugen Kaisha (TYK) (RR 3) 2,276 Estimated tax payments by corporations (REG–107722–00) 4,354 Information reporting for distributions with respect to securi- ties issued by foreign corporations (Notice 3) 3,306 Look-through treatment of dividends from noncon- trolled section 902 corporations (TD 9260) 23,1001; (REG–144784–02) 23,1036 Passive foreign investment company (PFIC) purging elec- tions: Foreign corporation no longer satisfies definition of PFIC under section 1297(a) (TD 9231) 2,272 Foreign corporation no longer treated as PFIC under sec- tion 1297(a) or (e) (TD 9232) 2,266; (REG–133446–03) 2,299 Section 951 pro rata share allocations, special rules (TD 9251) 11,590 Statutory mergers or consolidations: Definition (TD 9242) 7,422; amendment (TD 9259) 19, 874 INCOME TAX—Cont. Under section 368(a)(1)(A), involving one or more foreign corporations (TD 9243) 8,475; correction (Ann 38) 24, 1062 Subpart F income (TD 9240) 7,454; (REG–106418–05) 7, 461 Transfers to corporations, corporate formations, corporate re- organizations (RR 2) 2,261 U.S. real property interests (USRPIs), disposition in inbound and foreign-to-foreign section 368(a)(1)(A) reorganizations (Notice 46) 24,1044 Credits: Alternative motor vehicle credit: Advanced lean burn and hybrid motor vehicles (Notice 9) 6,413 Mixed fuel vehicles (Notice 54) 26,1180 Child and dependent care credit, expenses (REG–139059–02) 24,1052 Clean renewable energy bonds (Notice 7) 10,559 Energy efficient home credit: Certification for dwellingunit other than manufactured home (Notice 27) 11,626 Certification for manufactured home (Notice 28) 11,628 Low-income housing credit: 2006 population figures used for calculation (Notice 22) 11,593 Satisfactory bond, “bond factor” amounts for the period: January through March 2006 (RR 5) 3,302 January through June 2006 (RR 14) 15,740 Suspension of certain requirements under section 42 due to Hurricane Rita (Notice 11) 7,457 Nonbusiness energy property credit: Eligible Building EnvelopeComponent or Qualified En- ergy Property (Notice 26) 11,622 Siding not component specifically and primarily designed to reduce heat loss or gain of dwelling (Notice 53) 26, 1180 Nonconventional source fuel credit, inflation adjustment fac- tor, reference price for CY 2005 (Notice 37) 18,855 Nuclear energy tax credits (Notice 40) 18,855 Qualifying advanced coal project credit (Notice 24) 11,595 Qualifying gasification project credit (Notice 25) 11,609 Rehabilitation tax credit, disaster relief (Notice 38) 16,777 Renewable electricity credit: And refined coal production credit, 2006 inflation adjust- ment (Notice 51) 25,1144 Reduction under section 45(b)(3) (RR 9) 9,519 Deduction for energy efficient commercial buildings, guidance for section 179D requirements (Notice 52) 26,1175 Deemed election to be an association taxable as a corporation for a qualified electing S corporation, correction to TD 9203 (Ann 12) 6,421 Determination of bona fide residence in a U.S. possession (TD 9248) 9,524; correction (Ann 32) 20,913 June 26, 2006viii2006–26 I.R.B. INCOME TAX—Cont. Disaster relief: Additional first year depreciation deduction relief for certain disaster areas (Ann 29) 19,879 Backup withholding, postponement of deadlines for certain acts due to Hurricanes Katrina and Rita (Notice 12) 7,458 Expanded postponement of deadlines for certain acts under section 7508A with respect totaxpayers affected by Hurri- cane Katrina (Notice 20) 10,560 Gulf Opportunity (GO) Zone resident population estimates (Notice 21) 12,643 Gulf Opportunity Zone Bonds, Gulf Opportunity Zone Ad- vance Refunding Bonds, and Gulf Tax Credit Bonds (No- tice 41) 18,857 Hurricanes Katrina, Rita, andWilma, postponement of dead- line to make certain section 165(i) elections (Notice 17) 10, 559 Hurricane Katrina, treatment of special evacuation al- lowances (Notice 10) 5,386 Rehabilitation tax credit (Notice 38) 16,777 Suspension of certain requirements under section 42 due to Hurricane Rita (Notice 11) 7,457 Disciplinary actions involving attorneys, certified public accoun- tants, enrolled agents, and enrolled actuaries (Ann 23) 14,729 Disclosure and use of tax return information: Disclosure of return information to Department of Agriculture for use in census of agriculture (TD 9245) 14,696 New and additional rules for electronic consent (REG–137243–02) 3,317 Domestic production activities, income attributable (TD 9263) 25,1063 Down payment assistance, home buyers (RR 27) 21,915 E-file, guidance necessary to facilitate business electronic filing and burden reduction (TD 9264) 26,1150; (REG–134317–05) 26,1184 Elections created or affected by the American Jobs Creation Act of 2004, procedures for makingorrevoking(Notice47)20, 892 Employer-provided vehicles, maximum values for which the special valuation rules of regulations sections 1.61–21(d) and (e) may be used (RP 15) 5,387 Entity classification, dually chartered entity, clarification of def- initions (TD 9246) 9,534 Foreign earned income exclusion (RP 28) 25,1147 Forms: 6765, Credit for Increasing Research Activities, revised (Ann 39) 26,1186 8609 revision, 8609-A replaces Schedule A (Form 8609) (Ann 2) 2,300 8898 (March 2006), Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession, new (Ann 25) 18,871 Frivolous tax returns, tax avoidance: All individuals are subject to federal income tax (RR 18) 15, 743 Attempts to escape taxation by attributing income to pur- ported trust (RR 19) 15,749 INCOME TAX—Cont. Claim of tax exempt status based on an unspecified “Native American Treaty” (RR 20) 15,746 Common frivolous arguments and schemes (Notice 31) 15, 751 Insertion of phrase “nunc pro tunc” on tax return (RR 17) 15, 748 Paperwork Reduction Act does not relieve taxpayers of the duty to file a federal income tax return (RR 21) 15,745 Guidance Priority List, recommendations for 2006–2007 (Notice 36) 15,756 Individual Retirement Accounts (IRAs), bankruptcy, right to re- ceive payments (CD 2081) 13,656 Information reporting by organizations that receive charitable contributions of certain motor vehicles, boats, and airplanes (Notice 1) 4,347 Insurance companies: Deemed sale or acquisition of an insurance company’s assets (TD 9257) 17,821; (REG–146384–05) 17,843 Life-nonlife tacking rule (TD 9258) 20,886; (REG–133036–05) 20,911 Prevailing state assumed interest rates, 2006 (RR 25) 20,882; correction (Ann 35) 24,1061 Tentative recomputed differential earnings rate for 2004 (No- tice 18) 8,502 Interest: Election to treat qualified dividend income as investment in- come, correction to TD 9191 (Ann 26) 18,871 Investment: Federal short-term, mid-term, and long-term rates for: January 2006 (RR 4) 2,264 February 2006 (RR 7) 6,399 March 2006 (RR 10) 10,557 April 2006 (RR 22) 14,687 May 2006 (RR 24) 19,875 June 2006 (RR 29) 23,1031 Rates: Underpayments and overpayments, quarter beginning: April 1, 2006 (RR 12) 12,637 July 1, 2006 (RR 30) 25,1134 Interim guidance with respect to the application of regulations section 1.883–3 (Notice 43) 21,921 Inventory: Heavy equipment dealers, replacement cost method of ac- counting (RP 14) 4,350 LIFO, price indexes used by department stores for: November 2005 (RR 6) 5,381 December 2005 (RR 8) 9,520 January 2006 (RR 15) 13,661 February 2006 (RR 23) 17,839 March 2006 (RR 28) 22,938 April 2006 (RR 33) 26,1148 Joint tax return, relief from joint and several liability (RR 16) 14, 694 Leases, tax-exempt use property (Notice 2) 2,278 2006–26 I.R.B.ixJune 26, 2006 INCOME TAX—Cont. Letter rulings: And determination letters, areas which will not be issued from: Associates Chief Counsel and Division Counsel (TE/GE) (RP 3) 1,122 Associate Chief Counsel (International) (RP 7) 1,242 And information letters issued by Associate Offices, determi- nation letters issued by Operating Divisions (RP 1) 1,1 Methods of determining W-2 wages for purposes of section 199 (RP 22) 23,1033 Mortgage bonds and credit certificates, median income figures, 2006 (RP 20) 17,841 National and area median gross income figures, guidance for 2006 (RP 20) 17,841 Non-mortgage widely heldfixed investment trusts (NMWHFITs) (Notice 29) 12,644; exception extended (Notice 30) 24,1044 Nonqualified deferredcompensation plans: Application of section 409A, correction to REG–158080–04 (Ann 11) 6,420 With associated offshore trusts or financial health triggers, transition guidance on the application of section 409A(b) (Notice 33) 15,754 Notional principal contracts, nonperiodic payment, listed trans- actions, disclosure safe harbor (Notice 16) 9,538 Partnerships: Certain distributions treated as sales or exchanges (Notice 14) 8,498 Classification of items under the TEFRA partnership provi- sions (RR 11) 12,635 Patriots’ Day 2006 in Maine, Maryland, Massachusetts, New Hampshire, New York, Vermont, and the District of Colum- bia, April 18 filing deadline (Notice 23) 11,594 Practice before the Internal Revenue Service (REG–122380–02) 10,563 Private foundations, organizations now classified as (Ann 5) 4, 378;(Ann14)8,516;(Ann18)12,654; (Ann 27) 18,871; (Ann 36) 23,1038 Proposed Regulations: 26 CFR 1.21–1 redesignated as 1.15–1; 1.21–1 thru –4, added; 1.44A–1 thru –4, removed; 1.214–1, removed; 1.214A–1 thru –5, removed; 602.101, amended; expenses for house- hold and dependent care services necessary for gainful em- ployment (REG–139059–02) 24,1052 26 CFR 1.46–6, amended; 1.168(i)–3, added; application of normalization accounting rules to balances of excess de- ferred income taxes and accumulated deferred investment tax credits of publicutilities whose assets cease to be pub- lic utility property (REG–104385–01) 5,389 26 CFR 1.56–0, –1, revised; 1.6425–2, revised; 1.6425–3, amended; 1.6655–0, added; 1.6655–1 thru –3, revised; 1.6655–4 thru –6, added; 1.6655–7, removed; 1.6655–5 re- designated as 1.6655–7 and revised; 301.6655–1, revised; corporate estimated tax (REG–107722–00) 4,354 INCOME TAX—Cont. 26 CFR 1.197–2, amended; 1.338–1, –11, amended; 1.846–2, –4, amended; application of section 338 to insurance com- panies (REG–146384–05) 17,843 26 CFR 1.199–3, –8, amended; computer software under sec- tion 199(c)(5)(B) (REG–111578–06) 24,1060 26 CFR 1.302–2, –4, amended; 1.331–1, amended; 1.332–6, added; 1.338–10, amended; 1.351–3, added; 1.355–5, added; 1.368–3, added; 1.381(b)–1, amended; 1.382–8, amended; 1.382–11, added; 1.1081–11, added; 1.1221–2, amended; 1.1502–13, –31, –32, –33, –35, –76, –95, amended; 1.1563–1, –3, amended; 1.6012–2, amended; guidance necessary to facilitatebusiness electronic filing and burden reduction (REG–134317–05) 26,1184 26 CFR 1.468B–0, amended; 1.468B–6, added; 1.1031(k)–1, amended; 1.7872–16, added;escrow accounts, trusts, and other funds used during deferred exchanges of like-kind property (REG–113365–04) 10,580 26 CFR 1.861–9, –12, revised; 1.902–1, revised; 1.904–2, –4, –5, revised; 1.904–7, amended; 1.904(f)–12, amended; 1.964–1, revised; application of separate limitations to dividends from noncontrolled section 902 corporations (REG–144784–02) 23,1036 26 CFR 1.954–2, amended; guidance under subpart F relating to partnerships (REG–106418–05) 7,461 26 CFR 1.1291–9, revised; 1.1297–0, revised; 1.1297–3, added; 1.1298–0, –3, revised; guidance on passive foreign investment company (PFIC) purging elections (REG–133446–03) 2,299 26 CFR 1.1502–19, amended; treatment of excess loss ac- counts (REG–138879–05) 8,503 26 CFR 1.1502–47, –76, amended; amendment of tacking rule requirements of life-nonlife consolidated regulations (REG–133036–05) 20,911 26 CFR 1.1502–77, amended; agent for a consolidated group with foreign common parent (REG–164247–05) 15,758 26 CFR 1.7874–1, added; guidance for determining owner- ship by former shareholders or partners of domestic entities (REG–143244–05) 6,419 26 CFR 301.6103(p)(4)–1, (p)(7)–1, added; procedures for administrative review of a determination that an authorized recipient has failed to safeguard tax returns or return infor- mation (REG–157271–05) 12,652 26 CFR 301.7216–0, added; 301.7216–1, –2, –3, revised; guidance necessary to facilitate electronic tax administra- tion (REG–137243–02) 3,317 31 CFR 10.1, 10.25, 10.27, 10.29, 10.34, 10.51, 10.52, 10.61, 10.65, 10.68, 10.76, 10.77, 10.78, 10.90, 10.91, revised; 10.2, 10.5, 10.6, 10.7, 10.22, 10.50, 10.60, 10.62, 10.70, 10.72, 10.73, 10.82, amended; 10.73, removed; 10.72 re- designated as 10.73; 10.71 redesignated as 10.72, 10.71, added; regulations governing practice before the Internal Revenue Service (REG–122380–02) 10,563 June 26, 2006x2006–26 I.R.B. INCOME TAX—Cont. Publications: 1223, General Rules and Specifications for Substitute Forms W-2c and W-3c, revised (RP 19) 13,677 4436, General Rules and Specifications for Substitute Form 941 and Schedule B (Form 941), revised (RP 25) 21,926 Qualified Intermediary (QI) branch rule, revocation (Notice 35) 14,708 Qualified mortgage bonds (QMBs) and mortgage credit certifi- cates (MCCs), average area housing purchase prices for 2006 (RP 17) 14,709 Qualified settlement funds and certain other escrow accounts, trusts, and funds, taxation and reporting of earned income (TD 9249) 10,546; (REG–113365–04) 10,580 Redemptions taxable as dividend distributions, withdrawal of REG–150313–01 (Ann 30) 19,879 Regulated investment company (RIC), commodity swaps (RR 1) 2,261; clarified (RR 31) 25,1133 Regulations: 26 CFR 1.141–0, –1, –15, amended; 1.141–13, added; 1.145–0, –2, amended; 1.149(d)–1, amended; 1.150–1, amended; obligations of states and political subdivisions (TD 9234) 4,329 26 CFR 1.163(d)–1T, removed; time and manner of making section 163(d)(4)(B) election to treat qualified dividend in- come as investment income, correction to TD 9191 (Ann 26) 18,871 26 CFR 1.197–0, –2, amended; 1.197–2T, added; 1.338–0, –1, amended; 1.338–1T, –11, –11T, added; 1.338(i)–1, amended; 1.381(c)(22)–1, amended; 1.846–0, –2, amended; 1.846–2T, –4T, added; 1.846–4, revised; 1.1060–1, amended; 602.101, amended; application of section 338 to insurance companies (TD 9257) 17,821 26 CFR 1.199–0 thru –9, added; 602.101, amended; income attributable to domestic production activities (TD 9263) 25, 1063 26 CFR 1.199–3T, –8T, added; computer software under sec- tion 199(c)(5)(B) (TD 9262) 24,1040 26 CFR 1.279–5, amended; 1.302–2, –4, amended; 1.302–2T, –4T, added; 1.331–1, amended; 1.331–1T, added; 1.332–6, removed; 1.332–6T, added; 1.338–0, –10, amended; 1.338–10T, added; 1.351–3, removed; 1.351–3T, added; 1.355–0, amended; 1.355–5, removed; 1.355–5T, added; 1.368–3, removed; 1.368–3T, added; 1.381(b)–1, amended; 1.381(b)–1T, added; 1.382–1, –2T, –8, amended; 1.382–11, removed; 1.382–8T, –11T, added; 1.1081–11, removed; 1.1081–11T, added; 1.1221–2, amended; 1.1221–2T, added; 1.1502–13, –31, –32, –33, –35, –76, –95, amended; 1.1502–13T, –31T, –32T, –33T, –35T, –76T, –95T, added; 1.1563–1, –3, amended; 1.1563–1T, –3T, added; 1.6012–2, amended; 1.6012–2T, added; 602.101, amended; guidance necessary to facilitate business electronic filing and burden reduction (TD 9264) 26,1150 INCOME TAX—Cont. 26 CFR 1.356–1, revised; 1.358–1, revised; 1.358–2, amended; 1.1502–19, amended; 1.1502–19T, revised; 1.1502–32, amended; determination of basis of stock or securities received in exchange for, or with respect to, stock or securities in certain transactions, treatment of excess loss accounts (TD 9244) 8,463; correction (Ann 31) 20, 912 26 CFR 1.358–6, amended; 1.367(a)–3, (a)–8, (b)–1, (b)–3, (b)–4, (b)–6, amended; 1.367(b)–13, added; 1.884–2, –2T, amended; 1.6038B–1, –1T, amended; statutory mergers or consolidations under section 368(a)(1)(A) involving one or more foreign corporations, and guidance necessary to fa- cilitate business electronic filing under section 6038B (TD 9243) 8,475; correction (Ann 38) 24,1062 26 CFR 1.367(a)–3, (b)–4, (b)–6, amended; application of section 367 in cross border section 304 transactions, certain transfers of stock involving foreign corporations (TD 9250) 11,588 26 CFR 1.368–2, amended; 1.368–2T, removed; statutory mergers and consolidations (TD 9242) 7,422; 1.368–2, amended; amendment (TD 9259) 19,874 26 CFR 1.468B–0, –1, –5, amended; 1.468B–6 thru –9, added; 602.101, amended; escrow funds and other similar funds (TD 9249) 10,546 26 CFR 1.671–4, amended; 1.671–5, added; 1.6041–9, added; 1.6042–5, added; 1.6045–1, amended; 1.6049–4, –5, amended; 1.6050N–2, added; 301.6109–1, amended; reporting for widely held fixed investment trusts (TD 9241) 7,427 26 CFR 1.861–9, –9T, amended; allocation and apportion- ment of expenses, alternative method for determining tax book value of assets (TD 9247) 9,521 26 CFR 1.861–9T, –12T, amended; 1.902–0, –1, –2, amended; 1.902–1T, added; 1.904–0, –2, –4 thru –7, amended; 1.904–2T, –4T, –5T, –7T, added; 1.904(f)–12, amended; 1.904(f)–12T, added; 1.964–1, –1T, amended; 602.101, amended; application of separate limitations to dividends from noncontrolled section 902 corporations (TD 9260) 23,1001 26 CFR 1.881–5, added; 1.881–5T, revised; 1.931–1T, amended; 1.932–1T, amended; 1.933–1T, amended; 1.935–1T, amended; 1.937–1, added; 1.937–1T, removed; 602.101, amended; residence rules involving U.S. posses- sions (TD 9248) 9,524;correction(Ann32)20,913 26 CFR 1.951–1, amended; special rules regarding certain section 951 pro rata share allocations (TD 9251) 11,590 26 CFR 1.954–2, amended; 1.954–2T, added; guidance under subpart F relating to partnerships (TD 9240) 7,454 26 CFR 1.1291–9, amended; 1.1297–0, revised; 1.1297–3, added; 1.1298–0, –3, added; 602.101, amended; guidance on passive foreign investment company (PFIC) purging elections (TD 9231) 2,272 2006–26 I.R.B.xiJune 26, 2006 INCOME TAX—Cont. 26 CFR 1.1291–9T, added; 1.1297–0T, added; 1.1297–3T, revised; 1.1298–0T, –3T, added; 602.101, amended; guid- ance on passive foreign investment company (PFIC) purg- ing elections (TD 9232) 2,266 26 CFR 1.1374–0, –8, –10, amended; 1.1374–8T, –10T, re- moved; section 1374 effective dates (TD 9236) 5,382 26 CFR 1.1441–1, –3, amended; 1.1441–6, revised; 1.6049–5, amended; 301.6114–1, amended; revisions to regulations relating to withholding of tax on certain U.S. source income paid to foreign persons and revisions of information reporting regulations (TD 9253) 14,689 26 CFR 1.1502–11, amended; application of section 108 to members of a consolidatedgroup, correction to TD 9192 (Ann 15) 11,632 26 CFR 1.1502–13(c)(7)(ii), Example 13, removed and re- served; intercompany transactions, manufacturer incentive payments (TD 9261) 21,919 26 CFR 1.1502–21, –21T, –32, amended; 1.1502–32T, –35T, removed; 1.1502–35, added; 602.101, amended; suspen- sion of losses on certain stock dispositions (TD 9254) 13, 662 26 CFR 1.1502–47, –76, amended; 1.1502–47T, –76T, added; amendment of tacking rule requirements of life-nonlife con- solidated regulations (TD 9258) 20,886 26 CFR 1.1502–77, amended; 1.1502–77T, added; agent for a consolidated group with foreign common parent (TD 9255) 15,741 26 CFR 1.7874–1T, added; guidance for determining owner- ship by former shareholders or partners of domestic entities (TD 9238) 6,408 26 CFR 301.6103(j)(5)–1, added; 301.6103(j)(5)–1T, re- moved; disclosure of return information to the Department of Agriculture (TD 9245) 14,696 26 CFR 301.6103(p)(4)–1T, (p)(7)–1T, added; 6103(p)(7)–1, removed; procedures for administrative review of a deter- mination that an authorized recipient has failed to safeguard tax returns or return information (TD 9252) 12,633 26 CFR 301.7701–1, –2, –5, revised; 301.7701–1T, –2T, –5T, removed; clarification of definitions (TD 9246) 9,534 26 CFR 301.7701–2, –2T, amended; classification of defini- tions (TD 9235) 4,338 26 CFR 301.7701–3T, added; deemed election to be an asso- ciation taxable as a corporation for a qualified electing S corporation, correction to TD 9203 (Ann 12) 6,421 Reporting requirements for widely held fixed investment trusts (TD 9241) 7,427 Revocations, exempt organizations (Ann 3) 3,327;(Ann9)5, 392;(Ann13)7,462;(Ann17)12,653; (Ann 24) 16,820; (Ann 28) 18,873; (Ann 33) 20,914;(Ann37)23,1039 Section 1503(d) filings, adoption of reasonable cause standard (Notice 13) 8,496 Standard Industry Fare Level (SIFL) formula (RR 13) 13,656 INCOME TAX—Cont. Stocks: Cross border section 304 transactions, application of section 367 (TD 9250) 11,588 Determination of basis of stock and securities received in cer- tain transactions (TD 9244) 8,463; correction (Ann 31) 20, 912 Outstanding stock rights, application of section 409A (Notice 4) 3,307 Treatment of excess loss accounts (TD 9244) 8,463; (REG–138879–05) 8,503 Substitute for return, Internal Revenue officer or employee, hear- ing on REG–131739–03 (Ann 10) 5,393 Substitute forms: W-2c and W-3c, general rules and specifications (RP 19) 13, 677 941 and Schedule B (Form 941), general rules and specifica- tions (RP 25) 21,926 Tax conventions: Competent authority procedures with respect to the U.S. pos- sessions (RP 23) 20,900 Superseding U.S.-Mexico LLCmutual agreement procedure (MAP) (Ann 8) 4,344 U.S.-Canada Appeals memorandum of understanding (MOU) (Ann 7) 4,342 U.S.-Ireland Common Contractual Funds MAP (Ann 19) 13, 674 U.S.-Japan Investment Bank MOU (Ann 6) 4,340; self-certi- fication of resident investment banks (Ann 20) 13,675 U.S.-Spain limited liability company (LLC) MAP (Ann 21) 14,703 Tax delinquency, sale of seized property (CD 2082) 14,697 Tax returns and return information, administrative review if re- cipient failed to safeguard information (TD 9252) 12,633; (REG–157271–05) 12,652 Taxation of cross licenses (Notice 34) 14,705 Technical Advice Memoranda (TAMs) and Technical Expedited Advice Memoranda (TEAMs) (RP 2) 1,89 User fees for competent authority limitation on benefits determi- nation (RP 26) 21,936 Waiver of penalties for failure to report loan origination fees and capitalized interest (Notice 5) 4,348 Withholding tax, U.S. source income paid to foreign persons (TD 9253) 14,689 SELF-EMPLOYMENT TAX Disaster relief, expanded postponement of deadlines for certain acts under section 7508A with respect to taxpayers affected by Hurricane Katrina (Notice 20) 10,560 Letter rulings and information letters issued by Associate Of- fices, determination letters issued by Operating Divisions (RP 1) 1,1 Technical Advice Memoranda (TAMs) and Technical Expedited Advice Memoranda (TEAMs) (RP 2) 1,89 June 26, 2006xii2006–26 I.R.B. U.S. GPO: 2006—320–797/20064
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